It emerged over the weekend that Tesco might have to start putting up prices. So, we have learned over the past few days, will Sainsbury’s, BT, and even JD Wetherspoons, a company that is usually committed to keeping prices as low as possible. One by one, many of the major consumer brands in the UK have said they will have to push up the amount they charge their customers, and are pinning the blame for that on the Chancellor Rachel Reeves’s Budget. The trouble is, the government seems unable to find a response. It is losing control of the narrative, and will soon find itself blamed for a fresh spike in inflation.
The government is losing control of the narrative, and will soon find itself blamed for a fresh spike in inflation
According to an analysis by Morgan Stanley, Tesco faces an extra £1 billion in costs over the next four years, and may have to raise prices to try and recoup some of that. It is not hard to understand why. In her first Budget, Rachel Reeves imposed a steep rise in the National Insurance charges that employers have to pay, as well as lowering the threshold at which the tax kicks in. The result? A huge increase in costs, especially for companies that employ lots of modestly-paid staff. With margins tight in most industries, that will be very quickly passed on to consumers.
The government seems to have no answer to that. In an extraordinarily tone deaf response, Reeves lamely tried to suggestthat companies could absorb the increase through greater ‘efficiency’. She seems unaware that companies like Tesco and Sainsbury’s are already extraordinarily ‘efficient’, and oddly doesn’t seem to think that the government should look for ‘efficiencies’ in the NHS or on the railways to save money instead of simply loading more taxes on businesses. If streamlining an organisation is as easy as she seems to think it is, then perhaps she should give it a try. Otherwise, the government has not found any form of response; it is floundering around with cliches about ‘black holes’ and ‘tough choices’.
Very soon, people will be paying more for a pint of beer, or a loaf of bread, or for their broadband, and the blame for that is being laid firmly on the Chancellor. That is a problem. All the polling evidence suggests that voters really, really hate inflation, and ruthlessly punish governments that allow prices to run out of control. That was one of the main reasons why the Democrats lost the presidential election in the United States, and the Conservatives were overwhelmingly defeated in the British election earlier this year. True, we may only see a modest increase in prices that will be swiftly forgotten about. But if the electorate starts to believe that price rises are the fault of the government, the Labour will soon be in big trouble – and it may already be too late to change that perception now.
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