Business backlash mounts over Reeves tax raid

Rachel Reeves faced growing backlash for her “anti-private sector” budget last night, as the boss of one of Britain’s biggest companies warned that a “flurry of costs” would drive up prices.

Sainsbury’s said the Chancellor’s National Insurance tax raid against UK plc would cost it £140m next year alone – and could force it to increase prices for hard-pressed shoppers.

The warning came as BT said its costs would rise by £100m a year as a result of last week’s Budget, adding it may also have to charge more. Morrisons puts its bill at £75m.

The interventions from three of the country’s largest companies followed similar warnings from Marks & Spencer, Primark and JD Wetherspoon earlier this week.

The threat of higher prices – as well as the prospect of lower wages and fewer jobs – makes a mockery of the Chancellor’s claim that her Budget would “protect workers”.

The increase in National Insurance for employers, which the Treasury hopes will raise £25bn a year, also appeared to contradict Labour’s manifesto not to increase the tax.

Former CBI chairman Lord Bilimoria, founder of Cobra Beer, last night called the Budget a “missed opportunity” that would do “the exact opposite” of promoting growth.

‘The previous Government raised taxes to their highest level in 70 years. This Government is increasing them even more. How can you have growth if you’re doing this?’ he told the Courier.

‘This Government had a great opportunity to be bold, to really promote entrepreneurship, and they didn’t do it. This Budget is anti-private sector, anti-investment and anti-business.’

As Sainsbury’s posted a 5 per cent rise in grocery sales in the first half along with a 3.7 per cent rise in profits to £503m, chief executive Simon Roberts expressed alarm at the impact of the budget.

He said: ‘This barrage of costs coming at us is significant. “This industry operates on very low margins, so there is simply no capacity to absorb this level of costs without some impact on inflation.”

He also called on the Government to move faster to reform business rates, which are charged at retail premises, to “balance the scales” with other tax rises.

In his first budget, Reeves (pictured) last week increased the National Insurance rate paid by employers on staff salaries from 13.8 per cent to 15 per cent and lowered the threshold at which companies start to pay it from £9,100 to £5,000 a year. M&S boss Stuart Machin called it a “double whammy”.

The Chancellor also announced a 6.7 per cent increase in the minimum wage to £12.21 an hour for those aged 21 and over, while for those aged 18 to 20 it will rise by 16.3 per cent to £10. per hour.

This comes on top of a new workers’ rights package that will cost businesses £5bn a year.

Revealing the £100m hit to BT, chief executive Allison Kirkby suggested that as well as raising prices, it would accelerate cost-cutting efforts, including job losses.

“It is a new inflationary pressure that we must suffer,” he stated. “We will go harder and faster on the cost transformation and on the plans we have laid out.”

Morrison chairman Sir Terry Leahy told the Financial Times the budget was “a very significant and direct tax on business”.

M&S revealed this week that the budget would add £120m to its costs, with Wetherspoon putting the bill at £60m.

Primark boss George Weston warned this would cost his company “several tens of millions”.

“It is not surprising to hear that prices will rise following the switch to employers’ national insurance along with a rise in the minimum wage which will reduce inflation,” said Anna Leach, chief economist at the Institute of Directors.