back to article Darling's budget targets small business

Chancellor of the Exchequer Alistair Darling's pre-Budget report promised more help for small businesses in order to make sure the first recession of the new millennium "is slower and shallower". He expects the UK economy will shrink in 2009 somewhere between 0.75 per cent and 1.25 per cent. This time last year, Darling …


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  1. peter

    Who wants odds?

    "Tobacco, booze and petrol tax will go up to offset the fall in VAT"....anyone want odds that in 13 months time when the VAT goes back on, that the rises in booze and fuel do not come back down to compensate......or is that a sure thing.

    And to be more accurate "equivalent of putting £12.5bn into the economy" should really have said "equivalent of not sucking £12.5bn from the economy". Funny that when the Government decide to tax us a bit less, it is always presented that it is the government 'giving' us money.

  2. Anonymous Coward

    Bucking Fankers!

    They're raising the duty on petrol, booze, cigarettes, etc- then in 13 months the "tax decrease" will be over and the price will rocket up again. What're the odds for that the individual item tax won't fall after the tax is reinstated properly?

    And does this span a General Election? You know, the type that'll get those responsible back out of the public's eye and get their opposition heaped with a choice of "raise the price of petrol, booze, et al and be hated by the voters" or "go bust from lack of income and be hated by the voters"

    Bankers, the lot of 'em.

    Just getting my calculator from my pocket to see how much this'll save me...

  3. Michael


    Seeing how oil prices have dropped by ~60% in the last few months while petrol has only dropped by about 20%, how the fuck does increasing fuel duty help the economy? It still costs a fortune to move things around, so prices will stay artificially high.

  4. Anonymous Coward
    Anonymous Coward

    Oh joy...

    1,000 odd panicked customers wanting their invoicing systems changed by Monday to deal with tax rates changing. Now is that at point of order, or point of invoice ? Presumably about half will pass on the savings to customers and half won't ... and then we have the ones who will do a bit of both...

    Oh well, I guess I get to change it all back again in a year or so...

    Wonder if the police need anyone to act as a training target for their new Tasers, sounds a more enjoyable job ...

  5. Eddie Edwards
    Thumb Up

    I'm a small business and I want money for nothing

    Where do I apply?

  6. adnim

    As a...

    wine drinking smoker who likes to get pissed and go for a drive. Who also doesn't buy much in the way of consumer goods, gadgets or baubles, how does this help me?

    And that's right taxes on alcohol and booze will not be reduced when VAT rates return to 17.5%

  7. M

    Jesus Buddha

    The VAT reduction will do jack shit and shops will not pass on the minimal savings. The increase in duty for the ciggies and drink is just a slap in the face.

    I would like to take that slutty tiger's worn out fanny of a chancellor and cnut him in the fcuk!

    *angry now*

  8. Ed Blackshaw Silver badge

    How about

    just not spending obscene amounts of money on ID card databases and other related pork and give the money back to the taxpayers you stole it from in the first place?

  9. Frank Bough
    Thumb Down

    Whose Money Again?

    Surely if I wanted to borrow more money to buy stuff it should be MY BLOODY DECISION? Please stop pissing my money up the wall, nulab.

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  11. Jon H
    Thumb Down

    And don't forget NI going up

    You'll be losing another half a percent of your wages to NI, just another tax really. The Beeb calculated if you (are lucky enough to) earn £40,000, you'll be £1000 a year worse off after the tax and NI changes.

    And sure, VAT down, but my biggest expense is petrol which isn't changing... petrol I use to commute to work where I'll now be worse off. Wonderful.

  12. Richard Stubbs

    Dev, Test and Production anyone?

    Is it just me is 4 working days a little short notice to change all the doggie hardcode VAT vales in UK IT systems and test? Its was around the last time that VAT changes that Sir Tim Berners-Lee “invented” that thing the “World Wide Web” remember the thing you use every day? Now there are thousands of online shops, Excel spreadsheets, and legacy’s accounting systems that, from what I can see will have to change - bang on Midnight the VAT rate in their code! So this is how Gordon Brown is going to stimulate the economy Y2K consultancy rates ahoy! Have fun!

  13. Chris G Silver badge

    In real terms?

    2·5% off VAT is a 2·13% reduction in prices, the article doesn't say how much the terrible three are going up by as a percentage but I bet it is more than enough to offset the VAT reduction and when you bear in mind that everything has to get to the shops ultimately by road, the cost of goods will go up. The increased base price is then subject to VAT which also claws back some of the reduction, so I'm willing to bet that this is just another bit of Nullabour spin that actually does nothing for anyone other than giving Darling something to say .When Broon was originally made Chancellor I thought we had discovered the worst possible but Darling at least equals him for dullness and lack of imagination and may even be worse generally.

  14. Brian

    Arse about Face

    If Darling thinks this is going to stimulate the economy, he's mistaken.

    Putting money directly in peoples pockets by cutting income tax would have created the necessary feelgood factor, but the VAT reduction isn't going to encourage either spending or investment, as most retailers will fiddle the reduction to increase margins.

    Typical economic illiteracy from the worst chancellor since the last one - the man doesn't even understand basic human nature.

  15. Nic Brough
    Thumb Down


    Don't think the VAT helps that much either.

    A lot of SMEs are on flat-rate VAT. They charge 17.5% and then hand over a lower %age to the government (Depends on the nature of their core business). For an IT business they pay 14% (apologies if that's wrong, I'm not a taxman), and pocket 3.5%. Other businesses get bigger discounts. If VAT drops to 15%, then they only get to trouser 1%, so that's a cut in their net income. Well done Darling.

    Unless I've missed the bit where he reduces the take by the same amount?

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  17. Anonymous Coward

    Am I the only one ...

    Who thinks this doesn't actually make any fiscal sense?

    Like the BBC making two series of Tripods and cancelling the third 'cos it was going to be too expensive?


  18. Anonymous Coward
    Anonymous Coward


    Everything will be cheaper but I can't afford to get to the shop to buy it? Sweet. Is there any way to make these idiots stop mucking around with things to see if they help? maybe a little planning wouldn't go amiss?

  19. Nathan Boal
    Thumb Down

    Who's a tad sceptical?

    We're screwed either way...

    1. VAT falls and retailers will increase their profits by failing to pass on the full 1.5% drop - Customers end up paying much the same regardless, except instead the retailers get more money instead of the government. Once VAT goes back up, retailers will be quick to add 1.5% onto everything, meaning we'll be paying more than ever.

    2. Fuel/Tobacco/Alcohol duty will be increased to offset the VAT cut - Who thinks that once VAT goes back to its original 17.5% the duty will be decreased to match? Thought not...

    The only real way to honestly 'inject' £12.5bn into the economy is to cut income tax so people have the money to spend in the first place.

    The only good thing to come out of this is the slower phase-in of the new car tax system which will save me about £100.

    Mine's the one with a wallet as empty as ever...

  20. Jamester
    Thumb Down

    Flat Rate VAT

    Just another wee thing going against IT contractors - they are only reducing the flat rate VAT amount from 13% to 11.5% against the Computing & IT Consultants category, we will effectively lose out on 1/2% that we previous were able to take advantage of. Most other categories are down the full 2% so more victimisation?

  21. Dave Bell

    DSG Happy?

    If this doesn't get passed on to customers, this will nearly double their profits.

  22. Anonymous Coward

    What a crock of...

    "Smaller firms will also be able to spread their tax payments, not just VAT, over a longer period."

    Yeah, great strategy. Companies who are ill setup to deal with anything financial get given longer to be unable to pay the bills they should budget for. Sod it, last I looked if you were unable to pay your bills you're insolvant. And there's no reason with VAT for example that to be a problem as you can pay VAT based on when your clients pay you, so you should never have an issue meeting those bills.

    Then other companies who would benefit from something more sane like a reduction in the corporation tax rate for small businesses, or better options on business rates than the current nosense of baseing it on "rateable value" of the property you're in, rather than how big you actually are, get squat.

    Oh no, hang on, I get shafted by the VAT thing. Yeah thanks, 6 days notice of a major chance to a critical element of billing.

  23. Cucumber C Face

    2014/5 election campaign starts here

    Cosmetic tax cuts and massive public debt - Joe Public falls for the short term window dressing.

    Fast forward to 2010 - Labour still lose election but far less badly than they deserve.

    Conservatives now in govt take blame for tax hikes to repay NuLabour debts between 2011-2015. The following election Labour romp back in to p$$$ away the painfully won Tory national wealth just like 1997.

    Assuming that is we somehow avoid 10 years of 1970's style (stag)inflation...

    That's not me getting my coat - it's Gordo taking the shirt from my back

  24. Anonymous Coward
    Anonymous Coward

    Re: Bucking Fankers!

    If you looked carefully, the new 45% tax bracket is scheduled to come into play after the next election, i.e. 2010. That way Labour can say that they didn't break their promise not to introduce more taxes. And yes, Labour admitted that freely that it is the reason behind that strategy.

    Go figure.

  25. Anonymous Coward
    Anonymous Coward

    2 thumbs down

    Based on this, I'd say he's aiming for a Q2 2009 election.

  26. Clyde

    small business screwed again

    Running a small business, I'm fuming about this so called budget. Darling Beeb is presenting this as a great "free money to the people" occasion. Truth being it's going to hurt us financially. Fuel duty increase is NOT GOOD AT ALL. Most shops are not going to change their pricing for 2.5% (or 2.13% at the till) as they'll need that little bit extra to cover the fuel duty increase and the costs of changing all their sales and accounting systems. Bankers ! And them that run banks are just as worse ...

  27. JMcL

    Wouldn't hold your breath waiting for price falls

    The VAT rate was dropped by 1% here in Ireland a few years ago in some sort of half arsed misguided attempt to control inflation which had been allowed to go out of control after the Euro was introduced with no control on how the "exchange rate" was applied (hey, we were rich back then - we didn't care). Prices in shops changed not one jot. They did of course move upwards a year later when the same dumb government, went "ah well, that didn't work, sure we'll just restore the VAT rate to what it was" to the usual bleating of "cost of doing business, yadda, yadda, yadda" by the retail lobbyists

    I just hope your consumer legislation is a bit more robust than ours - wouldn't be hard :(


  28. Anonymous Coward
    Anonymous Coward


    Re: £12.5 bn into the economy means that it (Government and/or civil service ?) is not sucking out £12.5bn, additionally:

    the full measures mean that the UK will be mortgaged for quite a while afterwards anyway.

  29. Anonymous Coward
    Anonymous Coward


    "....anyone want odds that in 13 months time when the VAT goes back on, that the rises in booze and fuel do not come back down to compensate......or is that a sure thing."

    It's all there in the PBR document, but to save you the trouble of having to look for yourself:

    "The Government will increase the overall duty on alcohol from 1 December so that

    the total VAT and duty remain broadly unchanged following the reduction in VAT to 15 per

    cent. The increase in duty will be maintained when the VAT rate is returned to 17.5 per cent in

    January 2010."

  30. Anonymous Coward
    Anonymous Coward

    No one is falling for it

    but let's make out that we are, so they will call a general election.

    Labour needs to go and very fast, we need some adults to run the country at the moment.

    Public sector needs to be diminished fast, and tax cuts have to go across the board, it is the only way to return the economy.

  31. Michael
    Dead Vulture

    Tobacco and booze up?

    Not a problem... I'm giving them up in the new year anyway.

    As for the petrol, Its cheaper than it was , and getting cheaper. This isn't going to bring in the money the government needs, ......but I can tell you what will!


    The nulab government has a definite agenda to bring this in, and guess who the minister responsible for it is?....

    And the opposition is no better ... Council tax is still increasing, despite negative equity, and they're still not apologising for gringing it in. No need to guess their stance then.

  32. Andy Davies


    "oil prices have dropped by ~60% in the last few months while petrol has only dropped by about 20%"

    and the cost of oil is what percent of the retail price of petrol?

    AndyD 8-)#

  33. Sir Runcible Spoon

    Good question about the flat rate @ NIC

    If I provide services worth £5000 currently I add 17.5% and then pay the chancellor 13% of the total (flat rate for my IT consultancy business).

    ((5000*1.175)*0.13)= (5875*0.13) = £763.75 so my company pockets the difference between the VAT I charge my customer, and the VAT I pay his scroteness ... (875-763.75)= £111.25

    Now enter the 15% vat..

    ((5000*1.15)*0.13)= (5750*0.13) = £747.50 so my company pockets the difference between the VAT I charge my customer, and the VAT I pay his scroteness ... (750-747.50)= £2.50

    Wow, I now go from being a cheap tax collector, to a practically unpaid tax collector.

  34. Steve
    Thumb Down

    Not tonight, Darling

    Look's like Gordo has given up any hope of winning the next election then, he's wasting his time laying traps for the Tories when they come in and have to clean up Labour's economic mess. Again.

    He could have tried 10p off a litre of petrol and diesel for the next year, funded by a windfall tax on the oil companies for the extra profits they've made in the past 12 months. That would not only have a bigger effect, psychologically as well as financially, it would send a message to the oil companies that they can't hike the pump price instantly when crude goes up, then drag their feet for months when crude goes down again...

    2.5% VAT reduction? Well, the shopping I was going to do anyway next week will be cheaper, but I won't be encouraged to do any more of it. Big deal.

  35. Eponymous Cowherd

    Big Dummies guide to the Economy

    I'm sure that's where Cpt Darling gets his ideas from.

    So you get a pathetic saving of around £22 on a £1K purchase? Has Cpt Darling not noticed that in order to *spend* money, you have to *have* money (and expect to keep it in the future). The increases in fuel duty alone will offset any desire to spend that the pathetic VAT decrease might have instilled.

    Darling is trying to encourage us to spend more while taking away the money with which we might do just that.

    The only way that makes sense is if you assume he are iintends us to start using credit again (i.e spend money we don't have). And that was how we found ourselves in this pile of shit in the first place.

  36. Anonymous Coward

    Too late

    We've gone under already.

  37. Anonymous Coward


    That £99.99 item I was uncertain about buying the other day will now be £2.12 cheaper

    Yay! that'll certainly tip the balance

    and if i take the bus in rather than the tube i could save double that!

    trust labour to stuff up an economic stimulus, for the same money they could have given every person in the uk £200 (12bn, american / 60mil) and although a lot would have saved it for when the labour come kicking the door down to get it back i bet a family of four getting £800 before christmas would be spending a little more than a possible saving of 2 1/2 p

    at least gordon brown found people losing their jobs funny enough with his inane grinning and sniggering like a naughty school kid

    no wonder labour are so scared of osborne, ruined their 'election 2007' and pointed out the uselessness of the 'economic stimulus 2008'

  38. Gerrit Hoekstra
    Thumb Up

    VAT Change = More IT work

    It has been said that the only people who benefit from changes in legislation are lawyers. It is IT consultants' turn now to benefit from these changes: If you have seen, like I have, how the VAT rate has been hardcoded in systems as if it were the most immutable certainty ever, you will know how much work businesses will have to do to switch VAT rates. Their 2.5% savings will be somewhat reduced when they get my bill for fixing their problem...

    And the best part of all this must all change back in 13 months!

  39. caffeine addict


    there's a cookie to the first person who finds a shop like M&S / Debenhams / HMV / Fopp (ie, someone who puts the prices on the products) who have actually changed their prices to account for the VAT change.

    Nowhere is going to advertise a 2% discount. Nowhere is going to go around relabelling all those £20 shirts as £19.60. Yay for giving more money to business and farking over the man on the street. Useless bunch of bastards...

  40. Graham Jordan

    Reg readers unite!

    Those extra few pence saved when buying Christmas presents this year may not get us far, but together we could hire a hitman and pop a cap in Darling's ass!

    Actually thats a lie, we'd still be short mucho's pennies. Disregard that last comment.

  41. Anonymous Coward
    Anonymous Coward

    @Andy D

    The amount that the price of petrol should fall is directly linked to the price of oil - but not in a linear way.

    It doesn't depend so much on what the percentage of the pump price a unit of oil is, but on whether or not the other costs in the pump price are fixed or variable. I don't know whether duties are levied on a per litre basis or on a percentage basis (or both) but the price of petrol is about what it should be in relation to the oil price.

    When oil was $90USD / bbl, petrol was about £1.08.9 Of that, the oil cost £0.38. So, about 71p of other costs - refining, logistics, duties, VAT, profit*.

    Now, the oil cost of a litre is about £0.21, plus yer 71p = £0.91.9, which is about right UNLESS some of the costs are variable. refining and logistics aren't, duties maybe, VAT is. However, you are probably looking at a max variance of 1 - 2 p, hardly worth a rant. You'd need to use 110 litres to have been deprived of a lovely pint.

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