Look out for the detail

Chancellor George Osborne has set out a coherent plan to address the problems of public finances but the depth and speed of the cuts and the lack of clarity on some basic concerns potentially threatens the strategy for sustainable future growth.

TSA, along with most business organisations, has welcomed the sensible balance on Capital Gains Tax and the medium term plan to reform Corporation Tax. It believes that markets will become more credible as a result of the firm action to contain public spending and reduce the country’s unsustainable structural deficit.

At the same time, the association regrets that problems such as public sector pensions appear to have been placed in the “too difficult” tray and their overdue and necessary reform placed in the hands of a Public Sector Pensions Commission.

Cross-party support is essential here but the Commission must report swiftly and the Government must act decisively on its recommendations.

Drycleaners will have been dismayed if not surprised by the increase in VAT to 20%. The Government urgently needs to raise revenue but this increase puts unwanted pressure on retailers at a time when economic recovery is at best uncertain and consumers need little incentive to curtail spending.

TSA urges the Government to keep VAT under review and to reduce the rate as soon as public finances allow.

Small businesses such as drycleaners will have been happier with the reduction in the small firms’ rate of Corporation Tax to 20% while all businesses will welcome the planned increase to the threshold for employer NIC contributions from April 2011.

TSA strongly supports Government’s desire, articulated in the budget statement, to move to a Low Carbon Economy. The current and consequent reviews of Climate Change Agreements must be completed swiftly so that the industry can negotiate a fresh long-term agreement on energy reduction.

A move to reduce the rebate on the Climate Change Levy below the 65% announced by the Labour Government would undermine the present Government’s objective.

A reduced rebate would starve business of the capital investment required to achieve worthwhile energy reductions and threaten the stable business climate which allows long term investment decisions.

TSA suggests a further public sector cut. Private sector textile renters provide innovative outsourced business solutions for the NHS and public bodies. It believes a halt to further public sector commissioning of laundries, with the unnecessary investment in buildings, machinery, textiles and staff, would be an easy win.