Wharf hesitant on pre-budget "boost"

As reported on the Wharf website on Monday, Chancellor Alistair Darling’s pre-budget report featured a 2.5 per cent cut in VAT until 2010, as well as an increase in tax to 45 per cent for those earning more than £150,000 a year.

He has also pushed forward £3billion in capital spending from 2010/11 to this year, and injected £20billion into the economy.

Government spending will jump from an estimated £36billion to £78billion this year, and then to £118billion next year. National Insurance will also rise by 0.5 per cent from 2011.

VAT savings will come into play on Monday, and many Wharf stores are already working to pass them on to shoppers.

Currys’ owner DSG International will cut its prices this week, and both Topshop owners Arcadia and the John Lewis Partnership – which owns Canada Square mall supermarket Waitrose – has pledged to do likewise.

Sir Stuart Rose, the chief executive of Jubilee Place mall-based M&S, said the retail chain will also work to offer savings, but admitted implementation presented “a logistical nightmare�.

Canada Square mall shopper David Bruck was also unconvinced.

He said: “It’s not going to make me rush out and buy a plasma TV, to be honest. I think it would have been better to announce a reduction in income tax, where people can actually see the money.

“The tax rise for high-earners is the decent thing to do. It’s quite reasonable for people earning that amount of money.
“But I don’t know where all this money is coming from. I thought it was borrowing that got us into this situation in the first place.�

Marsh Wall-based services and accountancy firm PricewaterhouseCoopers is unsure whether the drop in VAT will really make a difference to spending behaviour, and also questioned the tax hike for top earners.

Tax partner Clive Mackintosh said: “The changes to income tax and national insurance from April 2011 will lead to a significant increased tax burden for middle and higher earners. This will reduce the competitiveness of the UK to internationally mobile business people.�

Estate agent Knight Frank welcomed the extra £150million towards the construction of 2,000 new social-rented homes, but had hoped for “more innovative schemes� to get the property market moving. And economist Geoffrey Wood described the pre-budget report as “messy� and “fundamentally misconceived�.

The Cass Business School professor of economics said: “They could have borrowed more to put more capital into banks and ensure lending buy-backs and get the lending system working again.

“The tax rise doesn’t do anything of significance in terms of bringing in revenue, but it’s a further complication to an already complicated tax system. The Government seems to have sacrificed economic efficiency in the hope of gaining political popularity.

“The reaction I’ve had from fellow economists ranges from those that think this will do nothing to those that say it is silly, to others who say it will be damaging.�