The Treasury has issued a stark warning that the rapidly escalating tipping culture in the United States, now seen as 'out of control', could spread to the United Kingdom, threatening wage structures and raising consumer costs. The assessment, contained in an internal departmental briefing, argues that the normalisation of discretionary gratuities for a widening range of services risks undermining the principle of fair, fixed remuneration. It also cautions that British consumers could face an effective tax on everyday transactions, as businesses shift labour costs onto customers.
The warning comes amid a broader debate over service sector pay and the gig economy, with the Treasury concerned that an unregulated shift towards tipping could erode the national minimum wage's protective function. The department is considering interventionist measures, including potentially bringing discretionary charges under the remit of the Low Pay Commission, to prevent a US-style system where workers rely on customer generosity for a living wage. The Treasury's analysis draws parallels with the US, where average tip rates have climbed to 20-25 percent in many states, and where digital payment prompts have normalised gratuities for takeaway coffee and counter service.
The department fears UK employers might adopt similar defaults on card machines, creating a 'nudge' that pressures consumers into additional payments. Labour unions have welcomed the Treasury's scrutiny, arguing that tips should be supplementary, not substitutive, to decent wages. However, business groups have cautioned against prescriptive regulation, warning that it could restrict flexibility in service pricing.
The Treasury's intervention signals a significant shift in Whitehall's approach to a previously laissez-faire aspect of consumer culture.
