Gordon Brown’s unfavourable comments on the price of UK consumer goods compared with the US have raised the hackles of the retail sector, parts of which are under intense pressure to defend over-pricing.
Brown said US prices are half those in the UK and pointed to the Consumer Pricing Unit to be set up as part of competition measures announced last year. They will be outlined today (Wednesday) by trade secretary Stephen Byers.
The comments, on the back of the Office of Fair Trading inquiries into alleged over-charging by the four major supermarkets and electrical retailer Dixons, were described as “unhelpful” by David Southwell of the British Retail Consortium. “This is the Government wanting to appear as the consumer’s friend. It wants to drum up support for the euro by offering price transparency.”
But the Chancellor has been praised by the travel industry for his crackdown on monopolies and his bid to improve competition. Will Whitehorn, PR director for Virgin, welcomes the launch of the investigation into the airport industry. “The inquiry is good news for us.”
The six per cent duty increase on fuel – equivalent to 4.25p for leaded, 3.79p for unleaded and 6.14p for diesel – came as no great shock.
But there was consternation at the effects of the rise on the environment and smuggling.
Petrol Retailers Association director Ray Holloway says diesel increases are crippling the UK’s transport industry: “It is the final nail in the coffin for an already disadvantaged sector which will be unable to compete with European Union companies.”
The petrol increase will also exacerbate a “very serious” smuggling problem in Northern Ireland, says Holloway: “The huge differential between the Republic and Northern Ireland makes smuggling more rewarding and threatens the survival of legitimate businesses.”
John Dawson, director of the Automobile Association, agrees: “The Chancellor’s environmental excuses for hitting motorists with the fuel tax is wearing thin,” he says.
Brewers and distillers gave a mixed response to the Budget.
The liquor industry has been campaigning for a cut in excise duty to bring the UK more in line with beer and spirits prices in France. It argues the cut would undermine cross-channel alcohol smuggling, which the industry estimates is costing the UK about 220m a year in lost revenue.
The Budget did not cut excise but froze it for spirits and beer, promising tighter customs controls to combat smuggling instead.
Whitbread chief executive David Thomas is positive. But a Scottish & Newcastle spokesman says: “Sadly a freeze does nothing to address the issue of the huge duty difference between the UK and France.
“As long as that remains it is inconceivable that tightening customs controls can do anything to stem a tide which brings beer from France to Britain and sends jobs and revenue the other way.”
The Budget appears to take from big business in the name of the environment and energy efficiency and then gives it all back. The Government is to introduce a new levy on business’ use of energy from April 2001 and set significantly lower rates of tax for energy intensive sectors that improve their energy efficiency. But it will in effect give it back by cutting the main rate of employer’s National Insurance contributions from 12.2 to 11.7 per cent and reduce Corporation Tax from 31 percent to 30 per cent.
Diane Monkcom, marketing director of the Energy Savings Trust, gives a cautious welcome to the energy efficiency initiatives. But she says it is not clear whether the money from the new levy would bypass the Government’s coffers and go back into energy efficiency.
The 1.7bn computers for all initiative is aimed at creating a computer learning centre for every community. It will give the computer industry a further shot in the arm. A nationwide network is being created by enlisting the support of schools, colleges, libraries, Internet cafés and the high street. Brown said: “We will legislate so that employees will be able to borrow computers from their companies as a tax-free benefit.” A further 20m has been allocated so more teachers have computers for home use.
Inquiry into competition in airports and the water industry
Building societies and banks required to publish mortgage price information for the first time
No tax rise on alcohol
Tax on tobacco to increase by five per cent above inflation putting 17.5p on a packet of 20 cigarettes
Leaded and unleaded petrol up by 4.25p and 3.79p a litre respectively, diesel up 6.14p a litre, ultra-low sulphur diesel up 4.96p a litre
Tax on pools to be cut by 17.5 per cent
Vehicle excise duty for small cars cut from June by 55
Capital modernisation fund will launch a 1.7bn computers for all initiative