John Healey’s cash cow may have nothing more to give. The latest Office for National Statistics (ONS) figures show that the businesses Labour is rumoured to want to take aim at in the coming Budget for the third year in a row are already experiencing a lack of demand. Retail sales volumes fell by 0.4 per cent in September, four times the 0.1 per cent dip economists had pencilled in. Annual growth slowed to 0.8 per cent, from 2.4 per cent in August.
Reduced sales are evident across the board, so this isn’t a story of a dying high street. From August to September, supermarket volumes fell by 0.4 per cent to below June levels, and no, customers weren’t swapping out their staples for materialistic luxuries elsewhere.
Budget rumours take full aim at businesses, since they can’t target the ‘average person’
Non-food stores saw 0.4 per cent reductions, spending on household goods fell by 0.5 per cent and online sales took a hit of 2.2 per cent. The only thing people bought more of was petrol. Motorists who had been dreading filling up at the pump in August finally gave in to prices 30 per cent higher than a year ago.
Retailers trying to make sense of their own books told the ONS the cause was ‘lower footfall and customers cutting back’. I wonder why?
The answer: stores saw a reduction in boots on the ground and clicks to checkout because prices went up. Inflation rose to 3.5 per cent in September, up from 3.1 per cent and the highest in a year. Total spending rose 0.3 per cent in September, but the quantity bought fell 0.4 per cent at the same time. Customers walked in and spent more money for less.
Labour officials will try and distract us with the glimmer of the three-month view. Sales volumes were up 0.7 per cent in the three months to September, and August was revised up from 0.5 to 0.7 per cent.
But that was summer. Warm weather, school holidays, cocktail bars open for longer and World Cup promotions. Looking at the previous three months tells us where the economy was, looking at the most recent month tells us where the economy is heading. And, I’m afraid, for Healey it’s not a pretty sight.
Budget rumours take full aim at businesses, since they can’t target the ‘average person’. Family firms face a raid on succession, with transfers through redeemable shares taxed as income at 45 per cent rather than 24 per cent capital gains. Amazon and eBay may be made to collect VAT from the sellers on their platforms, worth up to £1 billion. The bank surcharge is set to rise from 3 to 8 per cent.
But all is not lost. Against all those taxes sits a single giveaway: the small business rates threshold will reportedly be lifted from £12,000 to £18,000, taking thousands of pubs and cafés out of the tax altogether. Help for the small guys – after two years of driving them into the ground.
Tesco and Sainsbury’s have spent October warning Healey off delivering a Reeves-style Budget come Wednesday. They have already absorbed the employer’s national insurance rise and packaging levy. Realistically, even if he did more of the same, this cow isn’t producing much milk.
