An unfit economy

My local gym is to close. I have been using it, usually every day, for over three decades. It was badly hit during the lockdowns, as everyone was, but it survived. But the most recent budget has overwhelmed it.

 It is labour intensive, and an increase in the minimum and living wage, coupled with a rise in so-called employer National Insurance and a halving of the threshold at which it is paid, have combined to make it unviable.

I was very sorry for the staff who spent a distraught weekend after being told on Friday that they would lose their jobs four days before Christmas.

 Unfortunately, the recent budget forgets the core lesson of economics 101: if you raise the price of something, then all other things being equal, people will demand less of it. This applies to labour as well as to goods. Reeves has made labour too expensive for many businesses, leading them to cut back on hiring, and to shed labour if they can. The hospitality industry, much of which depends on low cost labour, will be particularly hard hit. Pubs, bars and restaurants will close, taking their jobs with them.

The budget was called a growth budget, but it was immediately obvious that this was an anti-growth budget. Jobs will disappear, are already disappearing, and with it the consumption their wages generated.

 The UK economy has been set on a slope to decline for some time, and the budget has hammered too many nails into its coffin. It seems to be too much to ask that the status quo economic thinking be replaced by something at least more sensible to market forces.