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National Living Wage bad news for hospitality

National Living Wage bad news for hospitality

The biggest losers of the budget will be the employees who will lose their jobs as a result of the need to keep wage costs down, says hotelier Tim Hart, owner of Hambleton Hall in Rutland for 35 years

Caterers will be losing out from the budget, but the biggest losers of all will be those of our employees who will lose their jobs as a result of the industry’s need to keep wage costs under control. Meanwhile, over-25s, who have been targeted as the recipient of the new National Living Wage, will suffer inevitable discrimination as they seek employment.

The Low Pay Commission (LPC), who set the old minimum wage, were supposed to take into account the employment consequences of rapid rises in the rate. In setting his new National Living Wage, the chancellor has ignored the balanced recommendations of the LPC (an independent body of trade unionists, employers and economists).

In my business (high-end hotels, restaurants and an artisan bakery) I am generally satisfied with a net profit of 5% of turnover, with wages representing 33% of turnover. I have 200 employees of which half earn £7.20 per hour or less. Of these, half (around 50) are over 25. I expect the National Living Wage to slice 20% off my bottom line profits.

If this measure was to provide help to the needy, I might be more sympathetic, but the vast majority of our staff who earn less than £7.20 per hour, have never been near the benefits office. They include: singles sharing accommodation with partners or friends – no children; pensioners; and part-time or full-time workers whose wife or husband is the main earner.

As we await the small print detailing exemptions, the suspicion grows that caterers will pay the price for the Tories’ need to  ‘decontaminate the brand’.

In the past, politicians of all political colours have thought it right that the most vulnerable should be supported by ‘benefits’ funded by general taxation. George Osborne’s policy proposes, in effect, that responsibility for welfare should be transferred to caterers and hotelkeepers. In making the change he has caught up a much larger group of over 25s who are not in need of benefits or any other assistance.

If the chancellor wants to see the impact of a high minimum wage he could do worse than look across the channel to France which, according to a table produced by the Office for Budget Responsibility, had the highest level of minimum wage as related to median earnings among advanced economies. Apart from woeful levels of unemployment, France has seen the gradual destruction of a hotel, tourism and restaurant industry that was the envy of Europe.

Politicians and economists tell us that the correct response to higher wages is for employers to increase productivity. This model, taken from manufacturing industry, has little relevance to us. Our clients come to us for personal service, handmade food and immaculate housekeeping. All of these need people, not machines. Coming on top of an unsustainable, high level of VAT, the outlook for caterers in the UK has been further  undermined by this misguided budget.

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