Britain is heading for the cliff-edge and the Chancellor is content to watch it drop
Daily Telegraph
The tax on every person on the payroll is about to rise sharply. Pubs and restaurants will be hit by a huge increase in their rates bill. And the stamp duty you have to pay on buying a house is about to go up, especially for first-time buyers.
You might think the outlook for the British economy was already very bleak, and, of course, you would be completely right. And yet it is heading for a spring catastrophe, with a whole series of blows landing in early April.
Rachel Reeves, the Chancellor, should be taking action to avoid that. But unfortunately, there is not much sign of it – instead she appears intent on taking the economy right over the cliff.
The clock is ticking towards what is shaping up to be one of the most challenging months the British economy has ever faced. In only five weeks time, a whole series of tax rises will come into force, and all of them will land directly on businesses and sectors that are already struggling.
The steep rise in National Insurance (NI) announced in the Budget will come into effect, and there are already plenty of signs it is going to hit the jobs market very hard. Tesco, Asda and Sainsbury’s, all among the biggest employers in the country, have said that job losses are inevitable, while many more major businesses have said they will have to freeze hiring.
And that is before the tax rise has even come into effect. It is going to hit a lot harder once the extra tax bills for everyone on the payroll start landing next month, especially for small businesses that don’t have the luxury of planning ahead. Some will lay off staff, others will reduce hours and a few will have to close completely. One point is already clear. It is going to be brutal.
But that is not all. Business rates relief for pubs and restaurants will come down from 75pc to 40pc in April, imposing a big increase in costs on every kind of hospitality business, regardless of whether they actually make any money or not.
Many are already struggling, with pubs now closing their doors permanently at the rate of six a week, and the increase will push many more over the edge.
The 2pc rate of stamp duty for properties priced between £125,000 and £250,000 will come back into force in April, with the property website Zoopla estimating the number of transactions hit by the tax will rise from 49pc to 83pc. The result? There will be an inevitable slowdown in the property market, and with it a slowdown as well for all the businesses and trades that depend on it for their livelihood.
On top of all that, the “living wage” will also go up in April, another big cost that business has to bear, and, for all we know, Ed Miliband is planning an extra green levy or two just to make the whole mess even worse. It is hard to know how the Treasury ever allowed four such major costs to be imposed on the economy all at the same time.
I guess that is one of the advantages of “having the grown-ups back in charge”.
It is not as if the British economy was in great shape to start with. Growth dropped to just 0.1pc in the latest quarter and output is declining when measured on a per capita basis.
Inflation has spiked up to 3pc,and with energy bills rising will almost certainly climb higher still. The Bank of England looks unlikely to come to the rescue with interest rates cuts, and both consumer and business confidence have crashed.
The economy might be able to withstand one or two blows. But four in the same month? In reality, it is heading straight for a cliff edge.
The Chancellor has only a few weeks to save the economy from a full scale crash. There are options available to her. She could phase in the NI increase, as many of the major retailers have already begged her to.
That would soften the blow and give them more time to make efficiencies elsewhere, and, if necessary, lay off staff gradually.
It would make a big difference, and while it would cost some money in the first few months it should not impact the long-term forecasts that determine whether the Government has stuck to its fiscal rules or not. She could definitely rule out any further tax rises in the course of this parliament, and get the Prime Minister to back her up.
That would lift a cloud hanging over the investment plans of many companies, and, even if that is a step too far, she could say that if tax rises were ever necessary she would break her promise to keep the main rates unchanged rather than hit businesses all over again.
Finally, Reeves could launch a major review of public spending, and even without going the full Elon Musk make some real savings, so that more could be spent on public investment without tax rises. Any of those steps would go a long way to improving confidence, both for consumers and companies.
Sure, they are all “hard decisions”. But the Chancellor keeps telling us how good she is at making those.
None of them are impossible, and aside from the temporary impact of phasing the NI increase, none of them would cost any money. They would show some boldness, and a willingness to listen to what businesses are saying.
Instead, the inflexible, brain-dead Reeves seems intent on slamming her foot on the accelerator as the car heads straight towards an April cliff edge. It is going to be a catastrophe – but Reeves will only have herself to blame if the economy has slumped into a deep recession by the summer.
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