Britain’s cheapest supermarket plans to raise prices this Autumn

Aldi have stated that any tax raids on supermarkets will inevitably lead to price rises for households. This comes as a warning from Mr Hurley, Aldi UK Chief Executive, noting that any further increases in employer costs could lead to higher food inflation.

The upcoming Autumn budget has created uncertainty among many UK sectors, fearful of any tax rises. Along with the banking sector, many firms are worried about the tougher economic conditions, which may be passed on to households as higher prices.

The recent toughening of environmentally friendly packaging and higher national insurance in the previous budget have caused firms to cut down on recruitment and hike up prices. It could well end up being the most expensive Christmas for households, in which many may hold off until the budget.

What you need to know

The funding required for Reeves to spend next year is vitally important. If we recall Liz Truss’s mini budget, the financial market reacted aggressively, highlighting how investors were concerned with Truss’s high borrowing costs to fund tax cuts.

If the budget reveals higher government spending without matching tax rises, investors will expect more borrowing. This will mean more government gilts need to be issued, which causes prices to go down and yields to go up. As a result, it makes borrowing expensive and is likely to cause financial ruin.

Consequently, any spending announcement could lead to fiscal inflation, fuelling gilts to become less attractive. Since gilts are fixed-income investments, inflation can erode their gains, which will push yields higher. Since 2021, the 10-year gilt yields have risen significantly alongside inflation to 9%, driven by higher spending post-pandemic.

Households will need to consider what financial tools Reeves will use to fund his budget. Will it be a tax raid on the banks or raise further taxes for supermarkets? It’s a conundrum to solve in difficult economic conditions for Reeves. With the interest rate likely to be lowered this week, what path Reeves goes down is imperative for short-term results for Labour.

Will it be a warm, crispy Christmas for households or cold-turkey being served. Your Christmas lies with Rachel Reeves hands.