Chancellor Alistair Darling today defended his £1 trillion gamble to drag Britain out of recession, as Shropshire business bosses expressed serious doubts over whether his battle plan was capable of kick-starting the struggling economy.
Mr Darling this morning insisted he had done “the right thing” in his pre-budget report with his plans to cut VAT.
He will also boost tax allowances, and offer more cash to parents and pensioners.
But county business leaders claimed the good news in yesterday’s statement was largely cancelled out by plans to raise National Insurance, hike fuel prices, and give insufficient help for small firms.
Shropshire Chamber of Commerce director Richard Sheehan said: “If I were marking the Chancellor’s report card, I’d say ‘could do better’.
“There are a few good announcements like deferment of the small business rate of corporation tax, allowing businesses to spread out payment of their tax bill, and the new business finance scheme. But the proposal to increase Na-tional Insurance contributions is wrong.
“At the very time when the economy should be coming out of the recession, businesses will face an extra tax on employing people.”
He said the major winners of the 2.5 per cent VAT reduction would be those who sold “big ticket” items like cars and home appliances.
Shrewsbury businessman Barrie Williams, who chairs the West Midlands Business Council, said Mr Darling had been right to focus on VAT cuts and seek to boost consumer confidence.
But he added: “The real challenge that was missed by yesterday’s announcement is how we will keep people in work.”
Independent financial advisor John Booth, from Shifnal, said it seemed that “chaos reigned supreme” in the Government’s financial planning.
He added: “Consumer confidence will not recover for well over a year, so any money saved will be set aside and used to pay off debts as credit becomes more difficult to obtain.”
The stock market appeared equally uncertain this morning, as the FTSE 100 index fell in early trading. The pound also weakened against both the US dollar and the Euro.
By Carl Jones
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17 Comments
Could you please explain how there is going to be a hike in fuel prices. As I understood it the reduction in fuel prices due to the VAT reduction is being replaced by an increase in duty as it is with alcohol and tobacco products.
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I’m not a financial expert, but i would think that if the businesses don’t pay VAT, then they will only be affected by the duty increase.
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They don’t answer here – or anywhere, but apologists shout at you as if you shouldn’t have even asked the question.
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Ed, they are adding a permanent 2p increase to fuel duty to offset the VAT decrease. Notice the word ‘permanent’.
Basically it means that fuel won’t actually feel any benefit from the VAT drop and may even come off worse. Petrol is taxed twice, and that extra fuel duty will nullify any savings that could have been made from the lower VAT rate.
Say that petrol, on its own, costs 25p per litre. Say that current fuel duty is 50p, which brings fuel up to 75p per litre. Then you add on 17.5% VAT, which takes it up to roughly 88.13p per litre in total.
The government are lowering VAT to 15% which sounds great, but they are adding 2p onto fuel duty. So now you have a base cost of 25p, and you add fuel duty of 52p to that which brings it to 77p per litre. Add 15% VAT and it comes to 88.55p.
Bear in mind that the actual figures of fuel duty and the base cost of petrol are higher than the nice, round figures I’ve used here, so that increase will be all the more noticeable.
Not only is there no relief for motorists, but they are actually making things slightly worse. And to top it all off, that fuel duty increase will remain long after VAT has returned to 17.5% again.
When we take into account the increased NI rates as well, and the fact that those of us who commute are going to be hit by (unrelated, but worth mentioning here) train fare hikes in the new year, the only people who can possibly benefit from this pre-budget report are unemployed hermits who never travel anywhere. Unfortunately, those are the kinds of people who don’t have a great deal of disposable income and won’t particularly help with kick-starting the economy…
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Like weeing in the sea to warm it up!!
This Government are beyond belief, they may blame the global situation, but boy have they put us in danger. Once again so much waste so much more tax to come!!
Quango’s, New Labour initatives, poor public services, the end is nigh!
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ED
In 13 months time there will hence be a 2.5% increase in fule, tobac and drink when vat is again 17.5%. Simple work of a con man. They are acting as if the public are fools and should be happy in being ripped off even more. At least this time we know they are going to fleecs us in advance. Do not even mention the 0.5% increase in your NI payments (base income tax by any other name) for the rest of you life.
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there are 2 ways for a hike in petrol prices
1 the price of oil goes up, not likely
2 the pound loses value and the price goes up
sounds like a load of rich bosses to me about to be taxed`at .45p in the pound
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Moral here is never trust a man that dies his eye-brows.
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I was watching Survivours on TV and wondered if the present worldwide crisis isn’t going to end up like that?
We’ll I’ve already started stockpiling essentials like coffe and lip-gloss.
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Lucy
Quit watching TV is rots your brain – especialy junk like that, quit yabbing about the govt on here and get out do something. They’re doing what they do, if you don’t like it – campaign, stand for election even start a riot.. but do something.
At least if you go to and attempt to do something real – this isn’t real, its a few people talking and not listening.
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when is lord mandelson going to nationalise the banks, only when the goverment is in charge will the banks understand they are there to lend money as well
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You are all appear to be very pesomistic about the current economic climate and the measures that the present government took to tackle the mess of financial institutions.It is in our human nature to want to attribute blame to others,however,may I remind you all in what mess the conservative government has left this country;and if they were in power at this time and day we would have been in a bigger mess than we are now.THAT’S A FACT.READ THEIR POLICIES AND LOOK AT THEIR HISTORY…….This government it is the best thing that has happened in this country since the war;one exemption may be the invasion of Iraq.Before you run to any inadequate conclusions may I reassure you that Iam not supporting Labour.But I feel it is fair to tell the truth.
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on behalf of most said: #12 “This government it is the best thing that has happened in this country since the war;one exemption may be the invasion of Iraq.”
So its the best thing since the Iraq War then? Which hasn’t actually finished so I think alot of people would agree that Labour is the best thing since never.
I would like to say I am only voting Tory because they promise to reverse the abuses of the Parliment Act by Labour.
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Lucy the Tories do not stick with their promises so do not hold your breath! and Cameron and Osbourne would be so out of their depth they would probably do a runner within the first few months of power anyway!
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and did the tories ever use the parliament act, think so. in this respect kettle and black come to mind
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Labour or Conservative, to me they are both full of lies and ridiculous promises. Both taking left and right wing policies when it suits them and trying to pretend they still represent the people they are ment to.
Next election i will be voting for the Raving Loony Party, because at least they are honest about what they are about and what they stand for.
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Devon:
USE OF THE 1911 PARLIAMENT ACT
1914: Welsh Church Bill
1991: War Crimes Act
1999: European Parliamentary Elections Act
2000: Sexual Offences Amendment Act
2004 Hunting Bill
I think there is a very concerning sudden increase in the use of these draconian measures by the current government – and now opposition MPs are being arrested like scenes from Mozabique!
What has our great country, the birthplace of democracy, come to? All our democracy seems to allow us, is to choose which dictator we want to submit to!
Bring back the Tories and the Freedoms and true Democracy of our great land.
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