ACS (the Association of Convenience Stores) has welcomed the first Budget of the new Coalition Government. Its reaction to the main announcements are as follows:
The Chancellor announced an increase in VAT to 20% from 4 January 2011
ACS chief executive James Lowman said: “The much expected rise in VAT may be the least bad option for increasing tax revenue but it does present a risk to local shops. It is a great relief that the Chancellor has listened to us and not extended VAT into areas like food and newspapers, such a move would have dramatically increased the cost of goods in convenience stores.
“We also warned the Chancellor not to implement the increase in VAT immediately as this would not allow retailers enough time to change prices on thousands of products. The delay also allows retailers time to sell through products with price marks and avoids the previous error of introducing the change on the 1 January.”
The Chancellor announced reductions in taxes and national insurance contributions for small businesses. Cuts have been announced in the rate of corporation tax of 1% per year from 2011 to 2014; a reduction in the Small Business rate to 20% from April 2011 and a reduction in National Insurance Contributions for businesses outside of London and the South East of up to £5,000.
Lowman said: “Local shops welcome the decision to reduce corporation and small business taxation, and the increase in the thresholds for employer national insurance contributions. These tax reductions will leave retailers better equipped to deal with the challenge of economic recovery, and will stimulate new employment in the sector.
The Chancellor announced the reversal of previous increases in cider duty but no further changes to alcohol, and tobacco or fuel duty. He did note that there would be a review of alcohol taxation linked to binge drinking reported to the House in the autumn.
Lowman said: “Retailers have already seen significant duty increases this year, and the rates in the UK are still some of the highest in Europe. It is therefore a relief that the Chancellor seeks to make no further rise.
“We are glad to assist the Coalition Government in reviewing alcohol pricing and taxation issues. We will be stressing the need to take a detailed look at the relationship between high duty and the multi-billion pound illegal trade. This trade represents a £5bn black hole in the Budget and this Government should take a fresh approach to closing it.”