Tax hikes in the Budget could push soaring food prices even higher, the chief executive of Sainsbury’s has warned.
Simon Roberts said that customers were already holding back spending ahead of this month’s announcement, days after Rachel Reeves laid the ground to break her manifesto pledge by increasing income tax.
In a major speech on Tuesday, the chancellor put the country on notice of “hard choices” ahead, saying that “we will all have to contribute”, as she tries to fill a multibillion-pound hole in the nation’s finances.
Economists have warned Ms Reeves that a combination of sluggish economic growth, higher borrowing and Labour U-turns mean she must raise taxes or tear up her flagship borrowing rules in the Budget, a move which would risk creating turmoil in the markets.
Mr Roberts warned that inflationary pressures had already significantly impacted the supermarket sector this year, adding: “What we don’t want to see is further impacts that may cause further inflation. No one wants to see inflation go any higher.”
Marks and Spencer boss Stuart Machin also warned that Ms Reeves’s pre-Budget speech had fuelled customer worries over tax hikes and said shoppers were now “planning for the worst”.
The industry has already absorbed significant hits, including a rise in national insurance contributions in April which cost Sainsbury’s an extra £140 million, Mr Roberts said.
New red tape on packaging also added “tens of millions” to its expenses, with prices raised in response, he added.
The warnings came as the Bank of England held interest rates at 4 per cent, despite policymakers saying they believed inflation had "peaked".
The Bank’s governor Andrew Bailey told a press conference that he wanted to see more evidence over the longer term that inflation would not rise again.
Members of the nine-strong committee voted five to four in favour of maintaining the rate, which is used to dictate mortgage rates and other borrowing costs.
Tony Blair’s think tank has warned Ms Reeves that she must slash taxes again before the next election if she breaks her key manifesto pledge and hikes them in the Budget.
It has also said any any tax hikes, such as raising VAT or income tax, must be done in tandem with pro-business policies to break Britain’s “tax-and-spend doom loop”.
