Published: Thursday, 27th November, 2008 11:26am

Tax changes could do more harm than good

by Adam Hewitt

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JOBS are going in Reading and major projects like the new Civic Centre and Chatham Place face delays and cost-cutting overhauls - will Alistair Darling's tax manoeuvres this week help?

Not much, according to most small business owners and politicians contacted by the Chronicle - and it could even do more harm than good.

Mark Sleep, who owns Reading-based vintage car hire company Ages Past, said: "There was a king-sized con in Monday's pre-budget report as far as fuel is concerned. The cost at the pump is the same and the total tax take is the same, but the proportion of that which is VAT is now less.

"This has enormous implications - every small, medium and large business which needs to buy fuel for vans, buses, taxis, lorries, cars, anything, will pay the same price but can now only claim back 15%. The tax bill to those companies has actually gone up 2.5%.

"It's little businesses like ours that are going to be clobbered by this."

More than 6,000 people have already left angry comments about this situation on website PetrolPrices.com.

The VAT changes are also affecting Andrew Buck, owner of independent jewellers Woodley Goldsmiths, but for different reasons.

He said: "It's a lot of extra administration to try to implement the changes, whether it's all worth it for 2.5% I don't know.

"To reprice every item individually would take until next Christmas, by which time VAT will have gone back up to more than 17.5% by the sounds of it. We're probably having a 5% across-the-board discount, we're calling it 'We can do better than VAT'."

Pubs and off-licences will not benefit from the VAT reduction because the duty on alcohol is being pushed up to compensate.

Reading Campaign for Real Ale (Camra) spokesman Phillip Gill said: "When VAT goes back up again in 2010, alcohol duty won't be reduced. So it's actually just an extra tax increase and, once again, it's the hard-pressed publicans that will suffer. This is definitely a missed opportunity."

He said the Beehive at Upper Basildon, the Thatcher's Arms at North Street in Theale and the Bird in Hand at Sonning Common have all recently closed their doors.

CBI regional director for the Thames Valley Steve Rankin said: "We did ask for a number of specific measures to help small businesses, and the Government has delivered on a lot of those.

"But nothing in there really sorts out the credit lines, and that must happen if companies are to get through this recession.

"The absence of a very clear long-term plan for getting the public finances into order is extremely worrying, and some Government forecasts for future tax revenue seem unrealistic."

Reading East MP Rob Wilson aimed his anger at the future tax rises to pay for the huge jump in borrowing.

He said: "It's a massive tax bombshell aimed at the pockets of British families. It's £20bn in temporary tax cuts then almost £40bn in permanent tax rises, almost £1,500 per family. The Chancellor has doubled national debt to nearly a trillion pounds, and borrowed more than any other Government in our country's history.

"We're going to be paying off this massive debt for decades to come. Gordon Brown has mortgaged the country's future to try to safeguard his own."

Reading West MP Martin Salter backed the changes, and said: "This comprehensive range of measures put forward by the Chancellor strikes the correct balance between offering help to those who will be hardest hit by the global financial crisis and providing a stimulus package for the economy."

He praised the scrapping of unpopular changes to road tax on older second-hand cars, and said the temporary VAT cut and rise in the tax-free personal allowance would benefit poorer families.

He added: "I also commend the Government for its decision to pay for some of these benefits by increasing the top rate of tax paid by the top 1% who earn over £150,000 per year. It is only right that the very wealthy play their part."