Royal Mail workers are beginning a 48-hour strike that the retail sector warns could cripple the Black Friday discount shopping season.
The strike action is being taken nationwide by 115,000 staff represented by the Communication Workers Union (CWU).
University lecturers and teaching staff are also walking out on the first of three days of strikes – affecting an estimated 2.5 million students.
Around 70,000 members of the University and College Union (UCU) will strike today and Friday, and again next Wednesday, in a dispute over pay, pensions and contracts.
The union has warned of escalated action in the new year if the row is not resolved.
Scotland’s first national schools strike since the 1980s is also taking place over pay – with today’s one-day action by members of the Educational Institute of Scotland (EIS) expected to shut the majority of schools across the country.
The Royal Mail action is the latest stoppage in a long-running, and increasingly bitter, dispute over pay and the company’s modernisation plans.
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The CWU rejected Royal Mail’s “best and final” offer on Wednesday.
The walkouts are deliberately timed to coincide with the core pre-Christmas shopping season – a crucial earnings generator for Royal Mail – as strikes will also hit 30 November and 1 December, affecting Cyber Monday deliveries.
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More strikes are planned for 9, 11, 14, 15, 23 and 24 of December.
Retail intelligence firm Springboard has forecast a busy few days ahead as cash-strapped shoppers look to bag some bargains in the midst of the cost of living crisis.
It predicted that visits to retail venues on Black Friday will be 12.8% higher than on Black Friday 2021.
Fears of disrupted deliveries could force more bargain hunters towards stores rather than online shops.
The eBay marketplace said a survey of its small business members showed that half saw the impact of the Royal Mail walkout as “disastrous” for demand.
Image: An eBay survey found 89% of sellers expected a negative impact on sales
eBay’s UK general manager, Murray Lambell, warned: “The UK boasts one of the world’s most sophisticated ecommerce economies, with small businesses thriving by scaling up their retail operations online.
“But industrial action risks creating chaos at the worst time for businesses and families.
“Astronomical energy prices, rising interest rates, and the blowback from political unrest has made it incredibly challenging for small businesses to operate right now.
“Adding industrial action, which is causing widespread disruption to deliveries and sales, at the most important time of year for trading, risks being the nail in the coffin for many small businesses.”
Michelle Ovens, founder of Small Business Britain, said: “Small businesses are under incredible pressure right now, with every area of business under strain and cash-flow a huge problem.
“The widespread disruption caused by postal strikes will jeopardise a core sales channel for many small businesses during the critical peak period, when every sale counts.
“We need to be doing all we can to support these businesses to recover and grow, and minimise obstacles where possible, not place them under further duress.”
On the bigger picture, Andrew Opie, director of food and sustainability at the British Retail Consortium, said: “Retailers will be working closely with their delivery providers on contingency plans to ensure customers can get the goods they need, especially on Black Friday and the run up to Christmas which is so important to consumers and retail businesses during this very difficult year.”
The CWU argues that Royal Mail’s proposals mean it is fighting for the very survival of the company as we know it.
It claims the terms on offer would turn Royal Mail into a “gig economy-style parcel courier, reliant on casual labour”.
Royal Mail says it must modernise to survive.
It has sought to be excused its requirement for letter deliveries on Saturdays and wants to be able to deliver more profitable parcels seven days a week.
It says the strikes to date have cost it £100m.
Royal Mail’s parent firm IDS says that without a deal, it could carve the UK operation from IDS and has threatened thousands of job losses on top of 6,000 already out for consultation.
The union conducted a vote of no confidence in Royal Mail chief executive Simon Thompson this week.
He said of the company’s offer on Wednesday: “Talks have lasted for seven months and we have made numerous improvements and two pay offers, which would now see up to a 9% pay increase over 18 months alongside a host of other enhancements. This is our best and final offer.
“Negotiations involve give and take, but it appears that the CWU’s approach is to just take. We want to reach a deal, but time is running out for the CWU to change their position and avoid further damaging strike action tomorrow.”
CWU general secretary Dave Ward responded: “We are disappointed that instead of reaching a compromise to avoid major disruption, Royal Mail have chosen to pursue such an aggressive strategy.
“We will not accept that 115,000 Royal Mail workers – the people who kept us connected during the pandemic, and made millions in profit for bosses and shareholders – take such a devastating blow to their livelihoods.
“We urge every member of the public to stand with their postie, and back them like never before.”
It had seemed simple enough. In her first budget as chancellor, Rachel Reeves promised a crackdown on the non-dom regime, which for the past 200 years has allowed residents to declare they are permanently domiciled in another country for tax purposes.
Under the scheme, non-doms, some of the richest people in the country, were not taxed on their foreign incomes.
Then that all changed.
Standing at the despatch box in October last year, the chancellor said: “I have always said that if you make Britain your home, you should pay your tax here. So today, I can confirm we will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025.”
The hope was that the move would raise £3.8bn for the public purse. However, there are signs that the non-doms are leaving in such great numbers that the policy could end up costing the UK investment, jobs and, of course, the tax that the non-doms already pay on their UK earnings.
If the numbers don’t add up, this tax-raising policy could morph into an act of self-harm.
Image: Rachel Reeves has plenty to ponder ahead of her next budget. File pic: Reuters
With the budget already under strain, a poor calculation would be costly financially. The alternative, a U-turn, could be expensive for other reasons, eroding faith in a chancellor who has already been on a turbulent ride.
So, how worried should she be?
The data on the number of non-doms in the country is published with a considerable lag. So, it will be a while before we know the full impact of this policy.
However, there is much uncertainty about how this group will behave.
While the Office for Budget Responsibility forecast that the policy could generate £3.8bn for the government over the next five years, assuming between 12 and 25% of them leave, it admitted it lacked confidence in those numbers.
Worryingly for ministers, there are signs, especially in London, that the exodus could be greater.
Property sales
Analysis from the property company LonRes, shows there were 35.8% fewer transactions in May for properties in London’s most exclusive postcodes compared with a year earlier and 33.5% fewer than the pre-pandemic average.
Estate agents blame falling demand from non-dom buyers.
This comes as no surprise to Magda Wierzycka, a South African billionaire businesswoman, who runs an investment fund in London. She herself is threatening to leave the UK unless the government waters down its plans.
Image: Magda Wierzycka, from Narwan nondom VT
“Non-doms are leaving, as we speak, and the problem with numbers is that the consequences will only become known in the next 12 to 18 months,” she said.
“But I have absolutely no doubt, based on people I know who have already left, that the consequences would be quite significant.
“It’s not just about the people who are leaving that everyone is focusing on. It’s also about the people who are not coming, people who would have come, set up businesses, created jobs, they’re not coming. They take one look at what has happened here, and they’re not coming.”
Lack of options for non-doms
But where will they go? Britain was unusual in offering such an attractive regime. Bar a few notable exceptions, such as Italy, most countries run residency-based tax systems, meaning people pay tax to the country in which they live.
This approach meant many non-doms escaped paying tax on their foreign income altogether because they didn’t live in those countries where they earned their foreign income.
In any case, widespread double taxation treaties mean people are generally not taxed twice, although they may have to pay the difference.
In one important sense, Magda is right. It could take a while before the consequences are fully known. There are few firm data points for us to draw conclusions from right now, but the past could be illustrative.
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3:06
Are taxes going to rise?
The non-dom regime has been through repeated reform. George Osborne changed the system back in 2017 to limit it to just 15 years. Then Jeremy Hunt announced the Tories would abolish the regime altogether in one of his final budgets.
Following the 2017 reforms there was an initial shock, but the numbers stabilised, falling just 5% after a few years. The data suggests there was an initial exodus of people who were probably considering leaving anyway, but those who remained – and then arrived – were intent on staying in the UK.
So, should the government look through the numbers and hold its nerve? Not necessarily.
Have Labour crossed a red line?
Stuart Adam, a senior economist at the Institute for Fiscal Studies, said the response could be far greater this time because of some key changes under Labour.
The government will no longer allow non-doms to protect money held in trusts, so 40% inheritance tax will be due on their estates. For many, that is a red line.
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‘Rachel Reeves would hate what you just said’
Mr Adam said: “The 2017 reform deliberately built in what you might call a loophole, a way to avoid paying a lot more tax through the use of existing offshore trusts. That was a route deliberately left open to enable many people to avoid the tax.
“So it’s not then surprising that they didn’t up sticks and leave. Part of the reform that was announced last year was actually not having that kind of gap in the system to enable people to avoid the tax using trusts, and therefore you might expect to see a bigger response to the kind of reforms we’ve seen announced now, but it also means we don’t have very much idea about how big a response to expect.”
With the public finances under considerable pressure, that will offer little comfort to a chancellor who is operating on the finest of margins.
The economy is stagnating and job losses are mounting. Now is the time to cut interest rates again.
That was the view of the Bank of England’s nine-member rate setting committee on Thursday.
Well, at least five of them.
The other four presented us with a different view: Inflation is above target and climbing – this is no time to cut interest rates.
Who is right? All of them and none of them.
Central bankers have been backed into a corner by the current economic climate and navigating a path out is challenging.
The difficulty in charting that route was on display as the Bank struggled to decide on the best course of monetary policy.
The committee had to take it to a re-vote for the first time in the Bank’s history.
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Bank of England is ‘a bit muddled’
On one side, central bankers – including Andrew Bailey – were swayed by the data on the economy. Growth is “subdued”, they said, and job losses are mounting.
This should weigh on wage increases, which are already moderating, and in turn inflation.
One member, Alan Taylor, was so worried about the economy he initially suggested a larger half a percentage point cut.
On the other side, their colleagues were alarmed by inflation.
In a blow to the chancellor, the September figure is used to uprate a number of benefits and pensions. The Bank lifted it from a previous forecast of 3.75%.
In explaining the increase, the Bank blamed higher utility bills and food prices.
Food price inflation could hit 5.5% this year, an increase driven by poor harvests, some expensive packaging regulations as well as higher employment costs arising from the Autumn Budget.
Image: Rachel Reeves on Thursday. Pic: PA
When pressed by Sky News on the main contributor to that increase – poor harvests or government policy – the governor said: “It’s about 50-50.”
The Bank doesn’t like to get political but nothing about this is flattering for the chancellor.
The Bank said food retailers, including supermarkets, were passing on higher national insurance and living wage costs – the ones announced in the Autumn Budget – to customers.
Economists at the Bank pointed out that food retailers employ a large proportion of low wage workers and are more vulnerable to the lowering of the national insurance threshold because they have a larger proportion of part-time workers.
Of all the types of inflation, food price inflation is among the most dangerous.
Households spend 11% of their disposable income, meaning higher food price inflation can play an outsized role in our perception of how high overall inflation in the economy is.
When that happens, workers are more likely to push for pay rises, a dangerous loop that can lead to higher inflation.
So while the chancellor is publicly celebrating the Bank’s fifth interest rate cut in a year, behind the scenes she will have very little to cheer.
The Bank of England has cut the interest rate for the fifth time in a year to 4% but warned that climbing food prices will cause inflation to jump higher in 2025.
In a tight decision that saw members of the rate-setting committee vote twice to break a deadlock, the Bank cut the rate to the lowest level in more than two-and-a-half years. Households on a variable mortgage of about £140,000 will save about £30 a month.
Andrew Bailey, governor of the Bank of England, said: “We’ve cut interest rates today, but it was a finely balanced decision. Interest rates are still on a downward path, but any future cuts will need to be made gradually and carefully.”
The Monetary Policy Committee (MPC), the nine-member panel that sets the base interest rate, voted in favour of lowering borrowing costs by 0.25 percentage points.
However, rate-setters failed to reach a unanimous decision, with four members of the committee voting to keep it on hold and another four voting for a 0.25 percentage point cut.
Alan Taylor, an external member of the committee, initially called for a larger 0.5 percentage point cut but after a second vote reduced that to 0.25% to break the deadlock. Had they failed to reach a decision, Mr Bailey, the governor, would have had the decisive vote.
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It is the first time the committee has gone to a second vote and highlights the difficulty policymakers face in navigating the current economic climate, in which economic growth is stagnating, with at least one rate-setter fearing a recession, but inflation remains persistent.
Although the central bank voted to cut borrowing costs, it also raised its inflation forecasts on the back of higher food prices.
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0:41
‘We’ve got to get the balance right on tax’
The bank predicted that the headline rate of inflation would hit 4% in September, up from a previous estimate of 3.75%.
The September inflation rate is used to uprate a range of benefits, including pensions.
The increase was driven by food, where the inflation rate could hit 5.5% this year. About a tenth of household spending is devoted to food shopping, which means it can have an outsized impact on inflation.
The Bank said this risked creating “second round effects”, whereby a sense of higher inflation forces people to push for pay rises, which could push inflation even higher.
Economists at the Bank blamed poor harvests, weather conditions, and changes to packaging regulations but also, in a blow to the chancellor, higher labour costs.
It pointed out that a higher proportion of workers in the food retail sector are paid the national living wage, which Rachel Reeves increased by 6.7% in April.
Economists at the Bank also blamed higher employment taxes announced in the autumn budget. “Furthermore, overall labour costs of supermarkets are likely to have been disproportionately affected by the lower threshold at which employers start paying NICs… these material increases in labour costs are likely to have pushed up food prices.”
There is also evidence that employers’ national insurance increases are causing businesses to curtail hiring, the Bank said. It comes as unemployment in the UK rose unexpectedly to a fresh four-year high of 4.7% in May. Separate data shows the number of employees on payroll has contracted for the fifth month in a row,
The Bank said the unemployment rate could hit 5% next year and warned of “subdued” economic growth, with one member – Alan Taylor – warning of an “increased risk of recession” in the coming years.