Budget analysis

So what did you make of the Budget? Frustration with announcements on minimum pay and tobacco duty, or silver linings on business rates?

Here’s the context on the National Living Wage: the policy of over 25s receiving minimum pay rates equal to 60% of median earnings by 2020 was set by George Osborne in July 2015, and the Low Pay Commission makes recommendations on how to get to that level. Earnings growth since then has been slower than originally forecast, so it looks like in 2020 we might have a National Living Wage of about £8.65. This latest announcement shows that the Low Pay Commission is moving towards that end point, and Philip Hammond is faithfully announcing their recommendations. That may not be much comfort if you’re facing a 4.4% increase in your biggest cost area, but it’s the reason why the budget announcement wasn’t a surprise to us.

If I can understand the series of events on the National Living Wage, I’m frustrated by the harm the government has caused to retailers and themselves by putting up tobacco duties once again. This is 100% about the illicit trade. Of course governments all over the world want to discourage smoking, and of course duty increases are seductive because it boosts Treasury income and they get little public backlash about it because everyone knows that smoking is harmful to health. Except the people who win from this are illicit traders in tobacco who have just seen their profit potential increase even further.

Time will tell whether we look back on this budget as the moment when business rates reform finally began, or as just another tactical concession. What we do know is that the Chancellor has given you back the last quarter of your April 2018 rates bill increase. He’s also promised to value your store every three years rather than every five years, which is fairer in principle but must be workable in practice. The fundamental problems with the business rates system need to be addressed once and for all, and lobbying from groups like ACS won’t ease up now. 

We’ll also have to wait to see whether the investigation into taxing plastic packaging is a tax grab or an enlightened environmental incentive. We know that a deposit return scheme that would be an operational nightmare for small shops, but would a plastics tax replace a DRS system, or operate alongside it, and would it be any better? We should welcome the chance to have a broader debate about how to reduce the impact of packaging on the environment.

Let us know your thoughts.