Ministers either don’t understand private sector, or don’t care

No politician could actually get away with telling businesses to “suck it up” when they warn about the impact of tax rises, though Labour’s Darren Jones came dangerously close yesterday, airily telling the BBC that bigger businesses can handle higher costs.

While it’s true that they’ll find a way to pay these new taxes and wage hikes, it won’t be by dipping into their cash reserves; it will be by raising prices on consumers, passing costs on to suppliers, holding down pay for their existing staff, scaling back investment or avoiding any new hires.

In the supermarket sector, margins are already punishingly tight. Finding hundreds of millions of pounds a year to meet the demands of increased labour costs and new levies will not be easy and will not be done with consequences.

For ministers to pretend otherwise is either disingenuous or evidence of a devastating lack of awareness of the realities of private sector employment.

An uplift in public sector pay was among the government’s first acts, adding to the ‘blackhole’ of public finances long before revealing their plan to fill it in on the backs of private sector employers. Last week’s deal to call off London’s latest tube strikes will see substantial pay rises for London Underground staff (taking the salary of an experienced driver to just under £70,000) with the promise of a four day week to sweeten the deal.

Perhaps ministers assume the private sector can simply do as the public sector does. In this they are mistaken.

Some of the country’s largest employers in the retail and hospitality sectors have warned that unless the government revisits its plans for employers’ national insurance, price rises in shops, pubs and restaurants are inevitable. Such a move risks dampening consumer confidence, further undermining what little economic growth this government has managed to put on the cards.

Meanwhile, smaller employers will simply open fewer hours, endure an erosion to their profits (never guaranteed in the first place) and take on fewer staff. On top of these new costs, employers of every size will also be contending with Labour’s new employment rights reforms, which will add insult to the injuries caused by the Budget.

For a government that seeks to prioritise job creation and economic growth, they’ve been remarkably reckless.