Inflation has “surprisingly” risen outside of expectations (who’s expectations I have no idea as every business has been predicting this for months).
One of the main drivers of said inflation is the Government’s Budget which loaded a massive amount of cost, including increased employment taxation and increased wages, among others, onto businesses.
The “surprising” (to Government alone it would seem) result of that was that prices have had to go up to pay for the chancellor’s raid on business coffers. What a shock - increase the costs of doing business and what do you think is going to happen? This is playschool economics, is it not?
However, the Bank of England’s response to this is likely to be an increase in interest rates to curb spending and reduce inflation. Perfectly valid in normal, consumer demand driven inflation.
Except this isn’t consumer demand driven.
Final Nail
So, as I see it, increasing interest rates and choking off consumer spending is likely to be the final nail in the coffin of an economy which has been nose diving since April (When did the Budget measures come into effect again?).
So you’re screwing business on tax at one end, and cutting consumer spending at the other....
I wonder what the result will be....
Like I said, I’m no economist, so what do I know?
But here is what I do know.
- Pub closures are accelerating, around one a day and increasing.
- Hospitality businesses, and other sectors, are cutting jobs - a new opening in Hove admitted they’d taken on six less people as a direct result of the Budget’s measures.
- Operators are doing more with less people.
That’s the tip of the iceberg.
So rather than ramping up interest rates, how about the Government actually does something that might help reduce inflation and boost employment (something they claim to be keen to do).
Cut taxation.
More U-turns please
They’ve been pretty good at the U-turn of late, so how about scrapping or reducing the National Insurance increases.
Reforming and rebalancing the imbalance of business rates on hospitality - the recent Greene King report sensibly made a number of great suggestions that could be easily implemented and deliver considerable relief.
Cut VAT for hospitality. Follow the lead of some of our cousins on the continent, give operators a bit of breathing room on VAT and let them invest back into their businesses and people and push the economy forward.
Again, I’m no economist, but if someone like me (grade C, GCSE Maths on a good day) can figure out the above, surely the boffins that advise Government can do the same.
Let’s have a little bit of common sense at the top.