Such a huge increase in costs will be difficult to absorb for many businesses.
There is the real risk that many employers may scale back recruitment, limit wage growth, reduce benefits and bonuses and, in the worst scenario, lead to redundancies and job losses.
The alternative businesses have is to pass costs on to the consumer resulting in further inflation, at a time when we thought it was finally under control.
The Office for Budget Responsibility has already stated that it now expects inflation to average 2.6 per cent next year, compared to a previous forecast of 1.5 per cent.
Gilt yields have risen and whilst another cut to interest rates is still anticipated this month, will we now see a slower pace of reductions hurting the worker through high mortgage and debt costs for longer?
We may also see rent hikes as landlords pass on the additional costs of investing.
Depending on how narrow one’s definition is of a worker, technically Labour may have kept their pledge to protect them from their tax increases.
However, with such wide-ranging tax increases, indirectly everyone is likely to feel the pinch.
The huge investments planned now need to feed through to greater economic growth and improved public services or we may have further pain to follow.
Matt Hodge is partner in accountancy firm Buzzacott’s financial planning team
