Chancellor George Osborne was not a popular man amongst many of my clients with the proposals outlined in his summer Budget, the first all-Conservative offering for nearly 20 years. Now George isn’t the most popular man anyway, so what was it about his announcements this July that created so much dismay?

Anti-small business measures
It’s fair to say that his additional 7.5% tax on dividends drawn by small business entrepreneurs as from next April has hit at the very heart (and pockets!) of owner-managed businesses. And his statement that interest on buy-to-let mortgages will be gradually restricted to standard rate tax relief went down particularly badly with those people holding property portfolios, many of whom see that as their pension provision.

No, it was neither of those anti-small business measures. It was one that will affect businesses large and small – the idea of replacing the current ‘minimum wage’ with ‘a living wage’. It matters not the size of your business, the minimum hourly rate that you pay your staff is set to rise steadily over the next few years from £7.20 an hour to £9.35 for the over 25’s, a rise of around 30%.

Bigger businesses will simply increase their sales prices to compensate and no doubt add a little bit more for themselves. Retailer Next has already forecast price increases of 6% per annum in the run-up to 2020 and other household name retailers will undoubtedly follow suit.

Expect to see an increase in small business failures
But what chance does the small business, already burdened with the additional employee costs associated with pensions auto-enrolment, have of simply passing on this cost to its customers? None at all, so expect to see an increase in small business failures over the next few years.

Whilst I support the principle of ensuring that the lower-paid receive a fair wage for a fair day’s work, we need to be a little careful of the potential consequences. What good is it going to be to them if it forces the hand that feeds them to shut down and £7.20 an hour suddenly becomes zero?

The reductions in the rate of Corporation Tax and the increase in Employment Allowance, which Mr Osborne says will help to defray these costs, are nothing more than tokens. Come on George, what do you take us for?!