Mixed reaction for pre-budget report

The Chancellor’s pre-budget report has received a mixed response across different industries with plans to increase national insurance slammed as “madness” by the retail industry, while other initiatives have been welcomed.

Alistair Darling

Alistair Darling unveiled a 0.5p increase in national insurance from 2011 for those earning over £20,000 a year in his final pre-budget report before the general election next year.

He also confirmed that VAT would revert back to 17.5% in January from the 15% it had been pegged at since last year. The retail sector was given more time to change their price labels and now has until the end of January compared with the two weeks previously offered to ease the pressure on the sector during the January sales.

The British Retail Consortium (BRC) says “big” tax rises “harm customers and damage recovery”, adding that it is industry that will lift the UK out of recession “with retail leading the way”.

The Chancellor says it is a “critical time” for the economy, which will shrink by 4.75% this year. However, he adds he is “confident the UK economy will start growing by the end of the year”.

Elsewhere, it was announced that bingo duty is to be cut to 20% from 22%. The sector, which has been hit hard by the smoking ban and the economic downturn, has lobbied hard for a decrease in tax after it was increased by 7% at the last budget.

Paul Tolboys, chief executive of the Bingo Association, says the Association is “pleased” with the cut but “displeased” that the tax is still 5% higher than it was a year ago, especially as VAT has reverted back to his original level. However, he adds “getting anything out of the Government at the moment has to be a good thing at the moment”.

The Chancellor also announced a number of green initiatives including tax rebates for electric cars and a boiler scrappage scheme similar to the car scrappage initiative.

Edmund King, president of the AA, says it is hoped the tax rebate will encourage motor manufacturers “to bring an iconic electric vehicle to market as soon as possible.”

“Most sales reps would struggle getting up and down the M1 in the current range of electric vehicles available,” he says.

On the boiler initiative, the BRC, which had had called for a broader scheme to include domestic applications such as refrigerators welcomed the “recognition that price incentives are a major way of driving changes in behaviour” but added that this “goes nowhere near far enough”.

The Chancellor also revealed that the budget deficit would be £178bn this year, deeper in the red than the £175bn previously forecast.

Earlier this week, the Government unveiled a series of measures aimed at reducing the budget deficit. It hopes to save £12bn over four years through efficiency improvements.

As part of the cost cutting drive, marketing spend is to be cut by 25%, which when combined with plans to half consultancy bills, is claimed could save the Treasury £650m a year.

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