OPINION: When you poison the well of opportunity, ambition & innovation, everyone goes thirsty

A Government minister has stepped up to a lectern or more accurately, in this case, the dispatch box, opened their mouth and issued edicts that leave the majority of us wondering if not “how can we survive this?” then “what is the point in trying?”.  Cue the music to Back to the Future​. It’s deja vu for me and you.

Our last taste from the poisoned font of Government instruction was we all hoped a fading memory, never to be repeated, but this more latterly delivered dose of hemlock in many ways feels all the more cruel.

Given the almost cavalier leaking and trailing to the media of what was to come in the Budget, I think most of us expected a rise in the national living wage (NLW) and probably also employers’ national insurance (NI) contributions.

I certainly didn’t expect the ‘reduction’ of the NI threshold. I say ‘reduction’ but, in effect, what we’ve seen in practice is another stealth rise in the rate of NI. ‘Do the math’ as the Americans say.

Toxic brew

One eight-hour shift per week at the incoming rate of NLW takes you over the threshold. My ‘math’ says that’s an extra £615 per annum per affected employee and, unless there is a huge untapped cohort of people only wanting to work eight hours a week, pretty much every employee will soon be harvesting  employers’ NI at a higher rate for HMRC than the 1.2% rise suggests. It doesn’t exactly incentivise business to create jobs to entice the workless back into the workplace does it?

Now mix that ‘baseline’ cost increment with what is effectively a 50% rise in NLW over the past five years (during which time the Bank of England calculates total inflation was circa 25%), add the additional 1.2% employers’ NI rate rise and you are left with a pretty toxic brew.

Many will argue that pay rises are always a positive move but I am demur, especially when the levels are driven aggressively upwards such as we see now. It removes the opportunity for employers to reward both effort and ability.

If all available funds are being soaked up by Government-mandated costs, what is left to incentivise those whose innovation, application and dedication has benefited the business? The very individuals whose actions will drive growth and benefit the whole.

In my experience, a dogmatic drive to achieve remuneration parity inevitably results in a productivity deficit. To put it another way, when you poison the well of opportunity, ambition and innovation, everyone goes thirsty.

Political choice

For hospitality businesses and, for that matter, any companies with large numbers of NLW employees, this looks like nothing short of a huge politically motivated and ill-conceived land grab by the current Labour Government.

Add in the rise in capital gains tax for those looking for the exit door and what you are left with is a virtual stealth nationalisation of every such business in the country, where previously privately-owned businesses are becoming little more that vassal entities to funnel cash to an ever expanding and already bloated state. 

This outcome is not accidental or even the result of a panicked Government – lord knows we’ve seen enough of those.

This is a simple political choice to prioritise public sector expenditure and control over private sector viability and growth to change the model of our society from a market-driven one of opportunity to one of state-controlled social credit allotment.

If we’re not careful, we could be about to live our very own British Back to the Future​, one with a decrepit, rusting camel-coloured Allegro coughing and wheezing us back to the 1970s, surging inflation, high unemployment  and, ultimately, the International Monetary Fund.