The Tory Government And The Death Of Retail

George Osborne and David Cameron are not economists. They are out their depth in dealing with businesses going to administration and mass unemployment and as ever, they are preserving the interests of the Tory heartland voter.
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George Osborne and David Cameron are not economists. They are out their depth in dealing with businesses going to administration and mass unemployment and as ever, they are preserving the interests of the Tory heartland voter.


Here's something that nobody's really talking about at the moment.

In all the analysis of the decimation of the high street and whether it signals a shift from the physical shopping experience to the digital, whether it is reflecting mismanagement in outmoded forms of business nobody is digging into the major role that our government has played in this situation. HMV in administration on Tuesday, 4350 jobs. Blockbuster yesterday, 4600 jobs. Comet last November 6600 jobs. In total, since June 2011, the retail sector has shed 50,000 jobs.

Take Comet as a prime example; their owners purchased the firm for £1, they apparently walked away with £50 million of the government's money. The government then had to pay statutory redundancy, pay in lieu of notice and pay in lieu of holiday accrued but not taken to all Comet's staff. 6000 people

The same will happen if and when HMV finally take the needle off the record and when Blockbuster press eject. 15,000 people needing compensation for loss of work.

The argument can be made that each of these firms represented an old fashioned business model, items that were overpriced in bricks and mortar retailing that could more easily be bought physically online, downloaded or streamed and that argument stands. It could be argued that each of these firms made mistakes in their attempts to move with the on rushing tide of change introduced by the proliferation of Internet shopping. That also stands.

But all of them, independently, making the same mistakes? Bearing in mind at all times that Britain is the world leader in terms of market conversion to the digital arena with 9% of the retail market now being online. That's 9%. By my maths that leaves 91% of the market as physical sales.


The Sabotage Times Poor List

Long Live The British High Street!

There is a crucial point that is being missed here and that is the fact that the 'coalition' government's first act on taking office was to raise the VAT rate to 20%. Who saw that coming? Everybody. The Tories love a good stealth tax, avoids any real damage to their core support and punishes those at the lowest rung of the income ladder.

A 2.5% raise in a tax on goods has very little impact on higher earners. On lower earners it's a greater proportion of their already lower disposable income. Couple this with the ongoing reduction in benefits and the people who are most likely to shop in the three major chains above (mass market, non elitist) for lower end cost items are suddenly unable to do so. Nobody is reporting any possibility of Harrods, Sainsburys or Waitrose heading for the rocks, are they?

But it bites deeper than that. The 2.5% raise applies to the already increasing (and extortionately dutied) cost of fuel. This cost affects hauliers who pass on their increased delivery costs to their customers. Food may not be VATable but the supermarkets pass on the impact of higher haulage costs in the form of higher prices at the point of sale.
So we have a situation where the lower earning portion of society is, if in work, receiving pay increases that are lower than the rate of inflation (pay cuts in essence), losing benefit entitlement, paying more on fuel and food and therefore having less disposable income to spend on non essentials. The companies that trade these non essentials suffer lower sales, further hampered by the fact that the offshore trading tax loophole (only recently closed) meant that the disparity between High Street and Internet widened further as VAT increased. These companies are forced into administration, the government is responsible for their employees' statutory redundancy payments the base of this pyramidical economy that they are building widens just that little bit further.

It's a self fulfilling prophecy, creating less disposable income in society whilst increasing government expenditure, damaging the economy to a greater extent and leading to the increased borrowing that this government claims to be the legacy of others.

You can argue that Labour left no money (and left a note expressly saying as much). The reason for this? The bailing out then purchasing of Northern Rock, the repeat of this action with RBS the taxpayer now being the majority shareholder of the latter And, yes, the argument that Labour's handling of the banks left much to be desired is compelling but two facts remain on this;

1. The Conservatives sold Northern Rock very quickly. At a huge loss. To Richard Branson. A lifelong Tory supporter apart from the period when New Labour were in power when he suddenly managed to acquire left leaning tendencies.

2. Gordon Brown was an economist. His actions with Northern Rock and RBS prevented a run on the banks and nationwide financial disaster. His and Alistair Darling's tactics were adopted as the correct model for handling the financial crisis worldwide. He may have been portrayed as an unlovable, cold figure by the media and his 'bigot' remark in the election was calamitous.


George Osborne and David Cameron are not economists. They are out their depth in dealing with this. As ever they are preserving the interests of the Tory heartland voter, applying their favoured form of taxation with the claim that this is needed to reduce the deficit while the deficit actually grows, unemployment rises, government spending increases and the economy is decimated by their incompetence and lack of understanding of the needs of the people of this country.

And Gordon's appallingly poor bigot comment? What do you think David, George and their Bullingdon chums are saying about the majority of us as they throw us to the scrap heap?

Follow Ian on Twitter: @fish2310 and read his blog at