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Warnings voiced over pre-budget report

25 November, 2008

 

The Association of Convenience Stores (ACS) is among the industry groups which today criticised the chancellor’s Pre-Budget report for not going far enough to help retailers. Shane Brennan, ACS public affairs director, said: “The chancellor has made some dramatic changes to the tax environment for businesses. We welcome a number of the

measures targeted at small businesses in particular. However for the retail industry the pre-budget missed the opportunity to make a radical difference to the financial pressures on the industry.

“We made clear to the chancellor that the best way to help the retail sector is to postpone increases in business rates next year, and also to urgently review plans for implementation of the 2010 revaluation. These two planned rate increases have the potential to put the most pressure on convenience retailers.

“We are also very concerned that far from keeping taxation on alcohol and tobacco at the same level, the chancellor has increased the tax take in almost all cases. For example this means that he has increased alcohol duty by 17% this year. Every time the Government raises duty levels it pushes more people into the black market and fuels an unscrupulous multi billion pound criminal network.”

The ACS said the key points from the chancellor’s announcement were:

• Reduction in VAT from 17.5% to 15%

 

• Increase in fuel, alcohol and tobacco duty to offset reduction in VAT

• Freeze on increase in small business rate of corporation tax

• £1 billion Small Business Finance Scheme

• Increase in thresholds for empty property relief

Brennan added: “We understand the importance of maintaining access to credit for businesses. We welcome this and also measures to assist businesses in difficulty, whether it be through more flexible tax repayment plans, offsetting of operating losses against previous profits, or the Small Business Finance scheme.

“We are however concerned about the long term prospects of increased taxes. The planned increase in National Insurance contributions from 2011 will place further pressure on wage bills. We will be urging the Chancellor not to impair the recovering economy by placing disproportionate burdens on retail businesses.”

The Petrol Retailers’ Association (PRA) also criticised the pre-budget report.

Ray Holloway, PRA director, said: “The chancellor’s good intentions are shown to be rather thin through his plan to increase fuel duty to make up for the loss in VAT income from motor fuels. Some of the benefits motorists gained as fuel prices dropped following 2008’s record high fuel prices will now be lost. Motorists will have less money to spend elsewhere in the economy. The move will also have a negative impact on the UK’s hard-pressed fuel retailers, who also benefit when fuel prices are lower.’

The first 2p-a-litre hike on fuels kicks in on December 1. There will also be a 1.84p-a-litre duty from April 1 2009.

Edmund King, president of the AA, added: “The chancellor is giving with one hand and taking away with the other. Increasing fuel duty whilst reducing VAT shows that the chancellor is playing roulette with global fuel prices and could lose his gamble. It is a very big gamble as there are 32 million motorists out there and most of them have a vote. If the global price of oil increases this hike may come back to haunt the government. It also means that when VAT reverts to 17.5% the motorist will be hit at the pumps once again.”