Chancellor George Osborne offered a balanced tax agenda with some sweeteners for business while dolling out much bitter medicine for the public sector.
Headline measures included a VAT hike to 20%, 25% cuts for non-protected departments (only health and aid are excluded), a fall in corporation tax, a freeze on council tax, no further cuts to capital projects and a public sector pay freeze for those earning over £21,000.
Businesses supplying the commercial landscape and amenity horticulture sectors welcomed the news that no further capital spending cuts would be made.
Managing director of James Coles Nurseries said: "This means that whatever is in the pipeline such as hospitals will continue, and they will need landscapes and they will need trees and shrubs from businesses like ours."
The garden retail industry said it would cope with the VAT hike and said its introduction in January next year would at least protect Christmas sales.
HTA president and Scotsdale Garden Centre MD Caroline Owen said the rise scheduled for 4 January 2011 was not unexpected: "We’re not happy with it but it will give retailers time to organise themselves. It won’t impact on Christmas and stock that has already been ordered and pre-priced. The changes have been well thought out."
The VAT hike will also have an impact on parks managers according to consultant Sid Sullivan.
As I understand it not all VAT can be claimed back so its going to make contracting work even more expensive. The money being given under HLF is subject to VAT which could makes schemes 2.5% more expensive.
With 25% departmental cuts and a savage autumn spending review in the pipeline, parks services and public sector workers appeared to be the big losers from yesterday’s announcements.
Sullivan warned councils may look to salami slice their budgets, applying percentage reductions across services.
But this would be a mistake, he argued urging parks managers to revaluate their roles.
"We need to look and find the things we do that are essential and those that aren’t, that’s the big issue for me", said Sullivan.
He added: "Contractors might be breathing a sigh of relief about all this - I wonder if it might encourage councils to look outside to more contracting?"
Quadron managing director Clive Ivil confirmed that said there were opportunities for contractors but said they must work with authorities to find solutions.
Summing up, BALI national chairman Richard Gardiner said it was a mixed bag for landscape industries:
"Obviously as expected VAT is going to effect our members in the domestic sector. It is well balanced though with things like the corporation tax dropping. They have tried not to alienate people who are running businesses. We will all have to wait until the autumn to find out the full impact but I dare say we are going to see an impact on our public sector work."
Measures affecting horticulture:
- • Additional current expenditure reductions of £30bn a year by 2014-15.
- • Two year public sector pay freeze on staff earning more than £21,000.
- • Corporation tax, currently 28%, to fall by 1p in the pound a year for four consecutive years until it reaches 24%.
- • Small companies tax to fall to 20%.
- • New firms outside south-east to be let off employer national insurance contributions, up to £5,000, for each of first 10 employees recruited.
- • Reversal of government decision to increase duties on cider by 10% above inflation confirmed and no new duties announced.
- • Regional Growth Fund to provide finance for regional capital projects over the next two years.
- • Capital allowances for the majority of plant and machinery assets to fall from 20% to 18%, while the allowance for longer-lived assets will fall from 10% to 8% from April 2012.
- • Annual Investment Allowance to fall to £25,000 a year to April 2012.
- Will Hutton to draw up plans for fairer pay across the public sector, without increasing the overall pay bill, so that those at the top of organisations are paid no more than 20 times the salaries of those at the bottom.
- • An independent commission chaired by John Hutton will review public sector pensions. There will also be consultation on scrapping default retirement age.
- • Rise in the state pension age to 66 will be accelerated.
- - VAT to increase to 20% on 4 January next year.
- Government to work with local authorities to freeze council tax for one year from April next year.
- 50p-a-month levy on phone lines to pay for the rollout of superfast broadband scrapped
- From April next year the basic state pension will be re-linked with earnings.
- The 10% Capital gains tax rate for entrepreneurs, which currently applies to the first £2m of qualifying gains made over a lifetime, will be extended to the first £5m of lifetime gains.
For further analysis and comment see Horticulture Week 25 June.