Do They Really Understand?

In our last newsletter we said we’d look at the Budget this time...and we will. But first I want to address something Emma Reynolds MP said recently, which got us, and a lot of other people, very angry indeed.

Maybe you saw it?

Emma Reynolds is Chief Secretary to the Treasury, and during an interview on GB News when challenged on government tax policy, she said:

“employers are not working people, they are companies”

Unsurprisingly, many small business owners reacted with fury. It’s insulting to people who work incredibly hard, and who understandably didn’t appreciate being told they didn’t count as working people by a senior member of the government!

It would be easy to dismiss this as a storm in a teacup. But Emma Reynolds isn’t an anonymous backbencher. She is Chief Secretary to the Treasury, so it’s reasonable to assume her view reflects at least one strand of thinking there.

She has, inevitably, since corrected the record, and the Chancellor has said employers are working people too. Fine. But for us it illustrates a broader point.

Politicians and government ministers too often seem to have no clue what it’s like to be a small business owner. No idea how their policies have changed the landscape and the business model for so many of us. No instinct for the challenges we face, or the sacrifices we repeatedly make to keep doing something we love, even when it barely pays the bills.

No understanding of the lives of the employers who actually create the jobs for others.

Platitudes about small businesses being the backbone of the economy are wearing thin, and when I saw a senior member of the government explain that employers aren’t working people, I genuinely put my head in my hands and wondered aloud why we even bother.

For context, and maybe something for Emma to consider: more than 99% of UK businesses are small, with fewer than 50 employees, and between them they account for around 13 million jobs. That’s nearly half of all private sector employment. So small businesses are doing a lot of heavy lifting in the UK economy.

So, to the Budget

There was one small chink of support for small high street businesses, with the threshold for small business rates relief being raised. That means many smaller businesses will no longer be dragged into paying business rates, and that’s helpful for some.

It doesn’t apply to everyone, and it doesn’t offset the big increases that many hospitality venues faced earlier this year when the Covid-era relief came to an end. It’s also worth saying that the threshold had been frozen since 2017, so this is broadly just catching up with inflation.

But it’s something, and whilst it doesn’t make a difference for us, it will help plenty of others and that’s good news.

But that was pretty much it.

No VAT relief, which always looked a long shot. No change to Employer NI, which did so much damage when it was introduced last year.

The Budget also confirmed that the National Living Wage will rise by 3.9% to £13.21 an hour from April, once again rising above inflation.

This is a tricky one. To be clear, we have no objection to the minimum wage rising, and we obviously believe that people who work hard in our industry should be paid properly. But combined with the Employer NI increase, it’s making it more and more expensive to give someone a job. And that has consequences which are not always positive.

To illustrate. Five years ago, a full-time job on the minimum wage, 40 hours a week, cost an employer around £20,000 a year in wages and employer National Insurance. From April 2027 that same job will cost almost £31,000. That’s a rise of 55% in five years. And the part that has risen fastest is the part that goes straight to the Treasury.

For most hospitality businesses, us included, paying staff is the biggest cost in the business. In a good month around 40p of every pound we take goes to paying staff. So, when your biggest cost increases by 55% in 5 years, the effects go well beyond the price of a flat white or a meal out…it changes the entire structure of the business model, especially when it comes to employing people.

The people who pay for it

It hurts the people who most need support. It discourages employers from taking a chance on the less qualified or less experienced person. It makes employers reluctant to provide the extra support and the extra time that someone might need to learn the ropes or get the hang of the job. It puts the younger, less qualified person at the back of the queue, and it especially hurts those who find the workplace a difficult environment to adapt to and who need more support to get up to speed.

Because training people takes time and patience, and lots of it. Extra shifts spent shadowing more experienced members of the team, dedicated training sessions, and an extra pair of hands to act as a safety net for someone learning a job for the first time. All of it costs more and more, and for most employers the choice becomes simple. Hire the experienced person or, often, don’t hire anyone and try to get by with fewer people.

The numbers say the same thing. There are around 90,000 fewer payrolled employees in the UK than a year ago, and hospitality alone has lost around 100,000 jobs in two years.

So where was the support for this in the Budget? Where is the plan to help young people into work, and where is the plan to help good employers provide the support that requires?

Hospitality is a starter job for so many people. It certainly was for me, at McDonald’s almost 30 years ago (£2.90 an hour by the way)! It’s something our industry should be proud of. But more and more operators are now taking on only the more experienced candidates, and it’s easy to understand why.

It’s heartbreaking to see the struggle that so many young people have trying to just get a foot in the door and be given a chance. The stories we hear from young people trying to get started are really tough, and sadly they are becoming more and more common.

This is a direct consequence of tax and government policy. It’s a choice.

Truthfully though, it doesn’t feel like an intentional one.

I think it comes from making short term political choices without a real understanding of how they play out in the real world, where employers are busy doing the real work of creating jobs.

So, do they really understand? On this evidence, sadly not.

And the answer to the question I asked myself when I saw that Emma Reynolds clip, why we even bother?

It’s the people. The best and most valued members of any team are the ones who have come up through the business. They’ve learnt and grown here, and they’re a big part of what makes it tick. We’re lucky to be surrounded by many of them, and you’ll know their faces from mornings at Oscar’s, visits to Plenty and dinners at Wilson’s.

Every decent employer wants to enable those journeys. We’d just like a government that does too.