Pre-Budget report: Regional reaction
TODAY’S pre-Budget report has been delivered in what the chancellor himself described as “extraordinary circumstances.”
The shadow chancellor has accused Mr Darling of “bringing this country to the verge of bankruptcy” by doubling the national debt, setting up “a huge unexploded tax bombshell timed to go off at the time of the next economic recovery”.
Figures from around Yorkshire have also criticised the moves with David Turner, group marketing director at finance systems specialist CODA warning that the 2.5% VAT cut could cause retail confusion – with price tag changes costly and complex to implement.
Mr Turner said: “Retailers in very seasonal areas like shoes told us they may have to wait until the next season’s stock comes in, early next year, before changing prices at all,” said Turner. “This change comes just as many UK retailers have implemented changes for Ireland, which changes its VAT from 20 to 20.5% next week. It’s looking like a change too far and Darling has made it clear that the changes will only last until the end of next year.”
Retailers using CODA’s finance software include Debenhams, Next, IKEA, Mothercare, Lakeland, and Monsoon.
However Neil Holyoake, tax partner at Ernst & Young in Leeds believes that the cut will be good for shoppers – particularly online. He said: “The temporary decrease in VAT announced today is clearly intended to stimulate spending and ease pressure on consumers’ pockets.
“However, with large elements of household expenditure such as essential food, domestic fuel and power, children’s clothes, books and council tax not subject to the top rate of VAT, the impact on lower income families may be muted and it will be families with more disposable income who will feel the full benefit of these changes.
“The Chancellor will be relying on retailers to immediately pass on these cuts to their customers but, given the need for computer systems to be changed, this may well be wishful thinking.”
IIn response to the announced rise in the top rate of tax to 45% after the next election, Peter Woods, human resource services partner at PwC in Leeds, argues that the move could drive away top talent from Britain.
He said: “This could have a real impact on industries in the region where there are more opportunities for talent to mobilise and move elsewhere – for example, knowledge-based industries such as technological or financial services. As a result, UK companies that rely on hiring high-earning talent will have to think increasingly about how to attract top performers.”
Professor Peter Spencer at the University of York and chief economic advisor to the Ernst & Young ITEM Club said that today’s report says more about the state of the public finances inherited by Alistair Darling from Gordon Brown than it does about the recession.
He said: “With the recession now hitting hard, we’re looking at public borrowing reaching a cool £118bn, 8% of GDP next year. In 2012/13 he’s still going to be borrowing £70bn – that’s almost £50bn more than he anticipated for that year back in April.
“He’s basically using the recession as an excuse for abandoning the fiscal rules, without putting much in their place. Darlings’ objective is to progressively reduce the structural deficit using fiscal drag, preannounced tax increases and a slower growth of spending. But the long-term growth in public spending is unbelievable and unachievable. Even if you believe this projection, it will take 6 years to get the underlying current account back to zero.”
Hull and Humber Chamber policy executive Richard Kendall believes that the moves to help businesses announced in today’s are far from certain. He said the chamber would be lobbying the Government to deliver some of the capital spending it has promised to bring forward to East Yorkshire – particularly on transport infrastructure.
Mr Kendall said: It is far from certain that the Chancellor’s announcements will do much to help businesses. For companies hit by the port ratings revaluation this was a missed opportunity to help them. For other businesses the promise that HMRC will be flexible is welcome, but the VAT reduction is not guaranteed to boost spending.”
Bradford Council Conservative leader Kris Hopkins has accused the Government of leaving the nation’s finances in disarray following today’s Pre-Budget Report.
He said: “This Government has lost control of the nation’s finances and all of us are about to pay the price. Alongside the increase in National Insurance contributions, I am especially taken aback by the decision to balance out the reduction of VAT on fuel by raising petrol duty.Labour Ministers have long been known to give away with one hand and take back with the other, but this is in an entirely different league.”
Steve Coulson, marketing director of Rotherham-based marine technology manufacturer Martek Marine, said that companies will have to pick up the bill for tax cuts announced in the pre-budget report and has criticised the report for its lack of any stimulus for the manufacturing industry.
He said: “Manufacturing is still an important sector within the UK economy, but again it has been neglected by the Chancellor. It seems that this government is more concerned with keeping consumers spending than keeping the cogs of British industry moving.
“In particular we would like to have seen incentives for companies developing environmental technologies, as well as an extension of corporation tax relief to established businesses. We don’t see any positives in this budget and in the long run we expect SMEs to pay for short sighted tactics with long term taxes and penalties.”
Do you agree with these views from regional business figures? What are your thoughts on today’s pre-Budget report?
