Britain is on the verge of an inflation spiral, and this week's Budget is accelerating it. Small, one-off cash handouts to households to blunt the cost of rising energy bills will be given to millions of households and likely forgotten about in the run-up to Christmas. British families are getting poorer, and the Government's policies are only making it worse.
The public finances teetered closer to the precipice as the Chancellor cut the country's fiscal headroom – the buffer it needs to withstand emergencies – in order to pay for some of his new giveaways. While the bond markets didn't react with horror – perhaps they feared something worse – the picture is just as gloomy today as it was before the Budget. The Government's cost of borrowing is stubbornly high, inflation is rising, and the Bank of England looks like it will hold rates for the foreseeable future.
Alcohol Duty Rise Hits Pints and Small Businesses
Before the Budget, reports emerged that the Chancellor was going to increase alcohol duty by around 2p on every pint. In fact, the record-breaking 4.55% increase in the tax on booze is expected to add 3p to every pint, up to 18p to a bottle of wine and nearly 50p to a bottle of gin.
While alcohol duty is a relatively small line item in the Budget, it is indicative of the wider picture: public spending is out of control, and the Government is instead choosing to tax economic activity to pay for it, instead of getting people off benefits and back into work. Despite a few headline-chasing handouts, such as tax allowances for small breweries and business rates relief funded by taxes on online retail, the overall picture is bleak for small businesses, especially those in hospitality or food and drink.
Families Face £1,000 Hit by 2028
These small exemptions are distortions designed to butter up a few businesses to sweeten the overall bitter pill. Taxes are rising and we will all eventually pay the price. Indeed, the Resolution Foundation suggests that British households will be around £1,000 worse off by 2028.
The bill is already landing. A few weeks ago, Sharp's Brewery in Cornwall announced its closure, meaning the death of Doom Bar and 40 jobs lost at what was once one of the country's most famous brewers of real ale. Taxing pints is no route to prosperity. Quite the opposite, in fact.
Business Costs Climb as Welfare Goes Unreformed
The CEO of the Wine and Spirits Trade Association, Mike Beale, said the Government's policies are counterproductive. This is the Laffer Curve in action: "Increasing alcohol duty is not boosting Treasury funds, but it is closing down businesses and pricing consumers out of a bit of joy in their shopping basket," he said. The average price of a pint is approaching £6. If British families are tightening their belts, these are the kind of expenses they will start cutting back on.
It isn't just booze which is getting more expensive. The cost of running a business is climbing in general. On Thursday's episode of Good Morning Britain, business owner and pie manufacturer Paul Bowen asked the Prime Minister where is his business's "breathing space". Minimum wage increases mean his company would have to sell over 20,000 more pies a week to make up for the extra costs imposed by the Chancellor. Add to that sky-high energy prices, which affect the cost of running his ovens and transporting all the ingredients to his shop in the first place, and the 2026 Budget sends a clear message to business owners: don't bother.
The Government is going out of its way to make business harder and a post-work pint more expensive to protect the country's giant welfare state. After a day of confusion on Thursday, the Chancellor confirmed that he will not cut the welfare budget by the end of the Parliament. Young people are out of work and claiming sickness benefits in huge numbers and the unreformed welfare state is costing working taxpayers hundreds of billions every year. The way out would be to cut welfare spending, hold the minimum wage for a few years to restore some common sense to the labour market, and stop taxing businesses to death.
