A lack of clarity around Rachel Reeves’s proposed tax rises is scaring off shoppers, the boss of Sainsbury’s has warned.
Simon Roberts said customers were holding off on buying big-ticket items amid uncertainty regarding the Budget, which the Chancellor has said will involve “difficult decisions” on tax.
He urged Ms Reeves to provide more information for households, who “inevitably are wanting to be clearer about what’s going to happen next”.
Ms Reeves is widely expected to raise taxes in her first Budget later this month, as she attempts to plug the £22bn black hole in the public finances she claims to have uncovered.
This has fuelled speculation of proposed increases in inheritance and capital gains tax, while a report earlier this week suggested the Chancellor could also target tax relief on employers’ contributions to pensions.
The Sainsbury’s boss told Reuters that a lack of clarity has fuelled a “continued caution in discretionary spending”, meaning shoppers are spending less on non-essential goods.
As well as providing more information on taxes, Mr Roberts said the Chancellor must also aim to bring down mortgage costs to ease financial pressure on households.
He said: “We need to see interest rates continue to come down because that directly impacts household spending. I think clarity in the Budget, one way or another, is helpful.”
His comments follow recent figures showing consumer confidence has taken a hit in the run-up to the Budget.
A closely-watched measure of consumer confidence by GfK last month showed households had become far less upbeat than they were in August.
According to the latest figures, consumer confidence fell by seven points to -20 in September, with GfK attributing this to “the withdrawal of the winter fuel payments, and clear warnings of further difficult decisions to come on tax, spending and welfare”.
Sir Philip Hampton, the former Sainsbury’s boss, said at the time that Ms Reeves must adopt a more upbeat approach: “The more politicians are gloomy of course the more these sort of animal instincts are going to be constrained.”
The gloomy narrative set by Downing Street since coming to power has also weighed on manufacturers, with bosses delaying big investment decisions until later this year.
The S&P Global Purchasing Managers’ Index revealed earlier this week that confidence has fallen to a nine-month low among factory chiefs.
Such surveys have prompted Ms Reeves to strike a more optimistic tone.
In her speech at the Labour Party Conference last week, she said Britain’s “best days lie ahead”, adding: “My ambition for Britain knows no limits because I can see the prize on offer if we make the right choices now.”
Mr Roberts weighed into the political debate as Sainsbury’s gears up for the crucial festive period.
Speaking to Reuters on Wednesday, he said the supermarket giant had enjoyed “three strong Christmases and we’re preparing for a fourth one to come”.
Rival Tesco will provide its own market update on Thursday.
Sainsbury’s has recently been seeking to focus increasingly on its grocery business in an attempt to ward off competition from low-cost competitors Aldi and Lidl.
Earlier this year, it unveiled the next stage of its “food first” strategy, which involves adding more fresh food options to stores.
As part of this shift in strategy, Sainsbury’s sold off its retail banking business to NatWest earlier this year.
Sainsbury’s also said in February that it was stripping £1bn of costs out of the business over the next three years, including job cuts in bakeries, warehouses and call centres.
It has said the savings will be used to lower prices for shoppers as well as to improve its balance sheet.
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