Retail boss calls for UK tax rises to be staggered to avoid stoking inflation

LONDON (Reuters) – The new Labour government must re-think the timing of tax rises imposed in last month’s budget and instead phase them in if it wants to avoid fuelling inflation, the chairman of the British Retail Consortium said on Tuesday.

The budget raised employers’ National Insurance, or social security, contributions by 1.2 percentage points to 15% from April, and also lowered the threshold for when firms start paying to 5,000 pounds ($6,374) from 9,100 pounds per year. It also raised the minimum wage for most adults by 6.7% from April.

Andrew Higginson, who chairs the BRC, the trade body that represents most major UK retailers, and is also chairman of FTSE 100 sportswear retailer JD (NASDAQ:JD) Sports, said when higher business rates were also taken into account the UK retail sector was facing a 5 billion pounds a year hit.

He called for the tax rises to be phased in over two to three years.

“I’m guaranteeing you today that if these (measures) go through as they are without any sort of feathering we’re going to see significant inflation in prices coming through,” he told BBC radio.

Higginson, also a former finance director of Tesco (OTC:TSCDY) and chairman of Morrisons, said there are only two ways retailers can deal with an increased tax burden.

“One is to cut back on investment, cut back on recruitment, cut back on headcount, cut back on jobs, and then secondly to put up prices,” he said.

Last week, retailers including Primark, Marks & Spencer (OTC:MAKSY) and Sainsbury (LON:SBRY)’s, and other major employers such as BT, warned it would be hard to absorb the increased costs of the budget.

Higginson said before July’s national election the Labour Party had promised business economic literacy and said it would be pro-growth.

“It’s hard to see that the actions so far really match that pro-business rhetoric,” he said.

($1 = 0.7845 pounds)