‘Madness’ to increase welfare spending in Budget, says AO World boss

The boss of electricals retailer AO World has called on the Chancellor to focus on cutting welfare spending rather than hitting businesses with more taxes, branding reported plans to scrap the two-child benefit cap as “madness”.

Founder and chief executive John Roberts said the Labour Party needed to “man up” and “make some difficult decisions” in Wednesday’s Budget.

He told the PA news agency that plans to boost welfare spending while the nation’s public finances need repairing, including speculation over moves to ditch the two-child benefit cap, were “madness”.

He urged Rachel Reeves to look at measures within the Government’s own spending to plug the public finances black hole and not hit businesses with more taxes.

He said: “Business is a force for good in the economy.

“It gets demonised in this Government and all it’s seen as is a source of more and more tax that they can then blow on the welfare budget.”

Mr Roberts told PA the Cabinet “couldn’t run a bath let alone a business”.

“They have not business experience or appreciation in this government,” he added.

The group’s half-year results on Tuesday showed the group was hit with around £4 million in extra costs from the Government’s move to increase national insurance contributions and the national minimum wage in April.

Despite this, AO World reported a 10% rise in pre-tax profits to £18 million for the six months to September 30 and said annual profits would be around the top end of recently upgraded guidance, for pre-tax profits of between £45 million and £50 million.

It said the popularity of its membership programme was helping to drive the performance.

The group has also this week launched its new Switch24 service, offering its members Apple iPhone 17 handsets from £17 a month – around 44% less than elsewhere in the market – which also allows them to trade them in for the latest iPhone model every two years.

Mr Roberts said it was a “first in the UK market”, and was a “great example of AO continuing to disrupt and innovate”.

He said while the deal is exclusively with Apple for now, he expected to extend the offer to other mobile handset makers in the future, while AO World will also launch its own SIM deal in the spring.

Shares in the firm lifted 6% on Tuesday morning after the results and rosier profit outlook.

Peel Hunt analysts said the new Swicth24 deal was a “compelling offer for members”.

They added the membership programme continues to “drive spend” and has the potential to double AO’s market share.

They said: “Its membership scheme brings together the group’s widening capabilities across finance, mobile and pre-owned.

“It also gives customers access to market-leading pricing and services.”