NORTH-EAST business leaders have been left disappointed by Alistair Darling’s Pre-Budget offering.
Local bosses say they are under-whelmed amid the feeling that the Chancellor has fallen squarely between two stools.
They wanted him to outline clear policies on how to stimulate a flagging economy and cut Britain’s higher-than-expected £178bn debt pile - and felt he failed on both counts.
Tony Sarginson, EEF North-east regional manager, summarised the general feeling when he described the PBR as “a bit disappointing”.
“It’s a holding budget, a negative one, almost,” he said. “We (local manufacturers) needed more specific help.”
The North East Chamber of Commerce (NECC) said the Chancellor’s “Bingo Budget” - a thinly veiled swipe at his under-whelming cut in bingo duty - fell short of more enterprising solutions that would tackle Britain’s debt and kick-start economic growth.
James Ramsbotham, NECC chief executive, said: “This was very much a ‘borrow now, pay later’ announcement which, while welcome that the Chancellor hasn’t hit businesses with a wave of new taxes, it will still leave underlying nervousness about where the money will eventually be found.”
There were, however, some reasons to be cheerful: the small firms corporation tax rate freeze and extension of the Time To Pay scheme, which allows firms to spread their tax payments, were welcomed widely on Teesside.
Executives earning low six- figure salaries would also be relieved that the 50% tax rate threshold had not been lowered from £150,000 to £100,000 - as had been rumoured before yesterday.
But generally there was a distinct feeling that these small pleasures would be followed by much pain after the next election, when the hard slog of reducing national debt will begin in earnest.
Martin Barber, a tax partner in the Middlesbrough office of Vantis, chimed with Shadow chancellor George Osborne when he said: “This was a pre-election budget report.
“The first budget after the election is when people might feel the pain.”
There are rumours that VAT could eventually be hiked up to 20%, despite yesterday’s announcement of an increase back up to 17.5% from January 1.
A 20% rate has been described by Steve Cochrane as potentially “catastrophic” for Tees Valley retailers.
Mr Cochrane, owner of Middlesbrough designer fashion store Psyche, said: “It would hurt a lot of people very badly.
The Pre-Budget Report failed to deliver businesses’ wishes including:
:: More options for businesses to access finance to create more competition for high street banks.
Martin McTague, FSB North East Policy chairman, said: “The Government should have addressed this challenge and looked at options such as a regional stock exchange to help small and fast growing businesses capture finance.”
:: A bigger squeeze on bank bonuses. Martin Barber of Vantis said employees earning bonuses of more than £25,000 could get around the one-off levy by drawing it down as a salary instead.
:: A credible plan for reducing the public deficit.
The CBI said: “The Government still needs to set out fuller plans on how it will reduce public expenditure.”
:: National Insurance rebate for small firms that take on new staff.
:: A postponement in the VAT rise.
:: Business rate relief to be made automatic to reduce paperwork for companies.
:: An extension of the 40% capital allowances rate - due to expire in 2010 - to encourage companies to invest in plant and machinery.
“The VAT rate cut (from 17.5% to 15%) did stimulate the economy and also helped retailers as that was 2.5% of their turnover that they didn’t have to find.”
Key points from the pre-budget report
:: National insurance (NI) to be raised by 0.5% from 2011, although no-one earning less than £20,000 will pay any more in contributions.
Manufacturers organisation EEF described the move as “a further tax on employment” that would do little to help companies create jobs.
:: VAT rate (currently 15%) to return to 17.5% on January 1.
Steve Cochrane, owner of Middlesbrough fashion store Psyche, said the move would be bad news for retailers but could spark a pre-Christmas rush from bargain-hunters hoping to capitalise on the 15% rate this month.
:: Planned 1% increase in small companies’ corporation tax deferred for one year, leaving the tax at 21% until 2011/12.
This has been welcomed by both the NECC and EEF.
:: New 10% corporation tax rate on income arising from UK patents.
Sarah Green, regional director, CBI North East, said the move would “spur on innovation among the region’s research-intensive companies”.
:: Time to Pay Scheme, which allows firms to defer tax payments, will be extended indefinitely.
Peter Hogan, tax partner at the Darlington office of business advisory firm Clive Owen & Co, said the move would be helpful to businesses.
:: A one-year freeze on the 40% income threshold of around £43,000.
Martin Barber of Vantis said the move was “tantamount to a stealth tax”, with thousands more workers set to be brought into the 40% income tax band in the next 12 months.
Other points included:
:: One-off 50% levy on any banking bonus above £25,000 before April 5, 2010, raising £550m to get unemployed into work.
:: Further year’s extension of Enterprise Finance Guarantee scheme, guaranteeing a further £500m of small business loans.
:: Plan to increase inheritance tax threshold to £350,000 scrapped for next year. Threshold will be frozen at £325,000 in 2010.
:: Basic state pension to rise by 2.5% in April. Other inflation-linked benefits to rise by 1.5%.
:: Spending on frontline NHS and schools to be protected for two years from 2011.