As firms deal with rising costs in an inflation crisis – the government offers them a tsar with a plan

Aims include ‘new and existing business-led initiatives that support people by encouraging businesses to do more to highlight discounted prices or product offers’. Businesses don’t seem happy, argues James Moore

How businesses are supposed to get a mark of approval from a government ‘tsar’ as some sort of price champion isn’t clear (PA)

A government campaign thingy – it’s really the only word I can use to describe it, having sought details from the Cabinet Office – designed to hit the cost of living crisis by urging businesses to cut prices really represents a new level of absurdity from a government that could write a cracking book on the subject.

Former Just Eat boss David Buttress is, per a government statement, going to “work in partnership with the private sector to identify, develop and promote new and existing business-led initiatives that support people by encouraging businesses to do more to highlight discounted prices or product offers”.

But there seems to be no new government money involved in it. So Mr Buttress is going to go around banging on doors and asking for special offers he can chat about? Pretty please with sugar on top?

Seriously, were this to have been put together by a Labour administration it would have been savagely attacked by in a number of quarters. Writers like, say, Michael Gove, and especially Boris Johnson, would have lambasted it when they were working in the column-writing business. For once, they wouldn’t have been wrong.

Yet this is apparently what we have coming from the recently appointed cost of living tsar (why is everyone given one of these roles a “tsar” anyway?)

The idea has certainly drawn a furious response from the Federation of Small Businesses (FSB), whose members are at the sharp end of the current inflationary surge and are understandably wondering if ministers have any ideas of substance to address it.

Martin McTague, the organisation’s national chair, was clearly speaking for his members when he said: “The fact that the government’s response to record levels of producer price inflation is a marketing campaign, rather than concrete and targeted help, is jaw-dropping.

“Many of FSB’s members are telling us that they are reaching breaking point, if they’re not already there.”

A couple of recent stories I’ve been told illustrate that point. There’s the manufacturer in County Durham witnessing material prices going up 48 per cent in little more than a week, with petroleum-based resin shooting up from £65 for 10 litres to £250.

“We can now only guarantee proposal prices for 7 days instead of 30,” they said, because longer than that and they would be skewered.

Then there’s the cab company, which has had to increase airport prices because, you know, fuel. Among other things. Customers, under the cosh themselves, are shopping around and looking for the cheapest alternative they can find. Lower profit margins are the result and a six-day, 60-hour week is going to turn into seven days to pay the bills.

These are, of course, anecdotes. But there is hard data to back up the idea that things are getting very nasty for smaller firms, micro-businesses, sole traders, any business of any kind in fact.

Look back to the end of May, in fact the 25 of that month, when the Office for National Statistics issued one of its business insights and conditions surveys. These missives cover different things at different times and they come out every couple of weeks. But what they have in common is that they contain a wealth of data.

As is often the case with deep, granular, stats, the tables take a little bit of getting used but with a little help you can often find gems of information. But perhaps that’s not the ideal description for the one I’m about to share with you.

Said survey, culled from the responses of nearly 9,000 firms, found 11.8 per cent were operating with no cash reserves. In some sectors it was worse still. For construction, hamstrung by supply issues and Brexit-induced labour shortages, in addition to the soaring cost of materials, the number was 18 per cent. For education-related business, it was 17.6 per cent. Back to the overall figure and you find that an additional 5.5 per cent had reserves of less than one month sitting in the bank.

How these businesses are supposed to get some mark of approval from a government “tsar” as some sort of price champion isn’t entirely clear.

Could they magically lower their input costs? Perhaps call upon the team at Buttresswarts school of voodoonomics? Please, please, pleas-cadbra! Zap that price!

Sorry to be so flippant, because inflation is a serious problem and it’s not getting any better.

This explains why the Bank of England seems to have dialled back on its use of the word “transitory” and why one of the members of its rate-setting Monetary Policy Committee recently gave a speech in which she voiced fears that some of the inflationary muck was getting embedded.

I was recently speaking to a senior executive at a large consumer-facing company about inflation. They weren’t at all surprised. They explained that staff wages were their biggest outgoing and those wages had been put up substantially to help staff through the cost of living crisis.

Some impact on prices simply couldn’t be avoided, because the business also faced, you’ve guessed it, sharply higher input and energy costs.

If the government can rustle up some price-cutting miracle workers to star in a campaign (with apparently no new money) it’s probably going to feel like a punch to the gut to a lot of people wondering how the hell they’re going to manage the next few months.

“It’s not just that national insurance has risen, that consumer confidence is at a record low, that fuel prices are only getting higher, that debt costs have gone up with the base rate, that supply chains are still subject to damaging delays – it’s all of this together, and more, creating a potentially very dangerous situation for countless small businesses and entrepreneurs,” Mr McTague said.

He said he wanted to see more firms lifted out of the business rates system and a reduction in VAT, especially on energy bills. These would be meaningful measures. But it seems that meaningful support has been ruled out in favour of a tsar and a thingy.