Anyone who has ever read Charles Dickens’s David Copperfield is likely to remember this basic piece of economic advice from Mr. Micawber. Micawber was a financial disaster himself, but he understood something that seems to be beyond the Government:
“My other piece of advice, Copperfield,” said Mr. Micawber, “you know. Annual income 20 pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income 20 pounds, annual expenditure 20 pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and — and in short you are forever floored. As I am!”
The U.K. Government, and that means this one and previous ones, is now stuck in the Dickensian misery of expenditure vastly exceeding income. The present Government has opted for tax rises to plug the gap and ignored the consequences for growth and employment.
Matthew Lynn in the Telegraph can only foresee a jobs bloodbath, and it’s starting at the retailer Next:
The trouble is, that is just the start of it. In reality the Rachel Reeves jobs bloodbath has only just begun – and it is about to get far worse over the next few months.
If the Chancellor thought companies could easily absorb the extra £24 billion in NI charges she is about to find out she was very much mistaken. The Retail Gazette reports today that Next is looking at automated scanners to replace till staff.
According to [Next’s] Chief Executive Simon Wolfson it is one of the few ways it can deal with the extra £67 million it will soon have to pay in higher employment taxes. “As we get natural turnover in our staff, where we introduce efficiencies, we will take on less new people rather than lose existing people,” he told the paper, explaining that Next would inevitably have to reduce its staffing numbers.
No one should kid themselves the company is doing that to improve customer service. The technology has been around for a decade or more, but most clothes retailers have ignored it, for the simple reason that customers don’t like self-scanners. Especially for buying clothes, we would rather deal with an actual person, and even the supermarkets have been getting rid of them.
Automation will lead to a collapse in employment and customer service:
A survey of the U.K. services sector last week by S&P Global found that firms were cutting back on staff numbers at the fastest rate in four years, while KPMG reported before Christmas that the number of vacancies is now falling at the fastest rate since the height of the pandemic.
As the new year unfolds, that will surely accelerate. Faced with a big rise in the tax they have to pay for each member of staff, firms will have no choice but to figure out ways of automating tasks that used to require actual people. Self-scanning will just be one part of it.
Worst of all, and this is where Mr. Micawber could step in with some handy pointers, the effect isn’t going to help Government spending either. It might increase it, while tax revenues remorselessly drop:
Every time a job is lost, the Government loses the NI, the income tax, the VAT on the money that person would have spent, and it may well have to start paying benefits as well.
Worth reading in full.
Stop Press: As if it couldn’t get worse, the Government is having to borrow more, so the pound has plunged. Still at least that means our exports will be cheaper. Hold on to your hats – it seems another tax raid could be looming:
The Treasury has held the biggest sale of five-year bonds in more than a decade as Rachel Reeves faces increasing pressure from rising borrowing costs.
The U.K. Debt Management Office (DMO) auctioned £4.25 billion of new debt a day after long-term Government borrowing costs surged to the highest level since 1998.
Five-year gilt yields have risen almost 35 basis points since the beginning of last month to around 4.45%, while 30-year yields are the highest in more than a quarter of a century.
The five-year gilts were sold by the DMO today with a yield of 4.49% – the return the Treasury promises to buyers of its debt.
Economists have warned that the Chancellor is on the brink of breaking her fiscal rules and being forced into another tax raid as bond yields rise.
You can read that story in full here.
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