Business is an easy target for tax. Ministers should resist
Even those who supported it pointed out that high-street retailers and leisure operators face far bigger challenges, many imposed by the government. The sectors, which tend to employ low-paid and part-time workers, have shouldered a disproportionate amount of the £25 billion extra national insurance burden announced in October's budget. Analysis of HM Revenue & Customs figures last week found that payrolled employment in the hospitality industry fell by 83,800 jobs in the nine months after the budget, while employment in retail fell by 45,600. April's steep rise in the minimum wage has also had a big impact.
Business rates are another factor. Before the election, Rachel Reeves promised to reform the deeply unpopular tax on property occupancy before replacing it altogether. In fact, October brought tinkering that will result in retail and hospitality tenants paying more by 2026.
• Business rates hike would drive up food prices, chancellor told
There was a dab of jam tomorrow, in that after that point businesses in those sectors will pay less for small properties. But that will be funded through higher charges on occupants of properties valued at more than £500,000. The property agency Gerald Eve has estimated that more than 16,000 buildings will be hit. They will include 1,800 supermarkets, 860 department stores and 483 warehouses but also hospitals, schools and universities.
Our deputy political editor, Harry Yorke, reports today that the retail industry is warning this added strain on big shops could force them to push up food and clothing prices, stoking inflation. Helen Dickinson, chief executive of the British Retail Consortium, says retailers 'are doing everything they can to shield customers from … mounting pressures, but there is only so much they can absorb'.
The truth is that retail and hospitality are easy to tax because they have big payrolls and are rooted in the UK. That does not make it right. They have already had to grapple with the shift towards online shopping. They have swallowed plenty of tax medicine. These companies employ the 'working people' Labour wants to protect. Squeezing them may be fiscally expedient but it is shortsighted.
Labour's failure to get means-testing of winter fuel payments and cuts to welfare past its backbenchers leaves Reeves with a hole to fill this autumn. The temptation will be to come back for more. The chancellor should be mindful of the pain high-employment sectors have suffered before she raises taxes further. She should also get on with reforming business rates.
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