‘Sorry Mr Darling, but this isn’t good enough’
The Chancellor’s Pre-Budget Report has provoked a mixed reaction from corporate leaders. We gauge the mood among six of them.
Chairman and chief executive of Prestbury Investment Holdings
I am disappointed. People feel bad and I'm not entirely sure exactly why this is going to make them feel much better. There is a conundrum that, on the one hand the Chancellor wants to stimulate the public into spending more, and on the other it was borrowing too much to spend that was one of the factors behind the credit excess.
This is a green light for significant tax increases on the wealthy in the future.
Historically, that has proven to be a disaster for wealth creation and entrepreneurial spirit historically and it will have a horribly negative impact on our economy if allowed to go on unabated.
If this was really supposed to be a stimulus package for the economy, why not simply reduce income tax, if only temporarily? Or give a stamp duty holiday on first - and possibly second - time home buyers and create an economic "feel-good" factor, which is what is so badly missing.
The Chancellor is gambling on a massive debt package, which I think will make no-one feel particularly good and will scare the life out of the middle-class.
The UK is entering a scary period. Not only is debt spiralling out of control but one in every two and a half jobs is now in the public sector, in non-productive labour.
Who or what is going to pay for this £118 billion of debt, and the liability to service these jobs and pensions for many decades to come? We are all focused on the UK balance sheet but the profit and loss account is in a shocking state.
The only impact in relation to the property market was the mention of empty rates relief on premises of rateable value of under £15,000. This seems to me of little help to anyone but the smallest shop owner.
Head of Infrastructure Finance at Bank of Scotland Corporate
It is too soon to tell the reaction of the financial markets in the long term. The immediate reaction was certainly impressive, with record gains on most major stock markets. In my view the stakes could not be higher. This is uncharted territory and I hope that shifting leverage to the state does not exacerbate the very real financial crisis we are in.
I am nervous about a cut in VAT followed by higher taxation in the future. While it will help the market SMEs [small and medium enterprises] in the short term, we may well see consumers treating this as yet another price reduction and they will hang on for the next and the next, which is the horrible start of deflation and all the dangers that brings with it.
If the financial markets believe that government debt can be repaid from the predicted revenues from taxation from future economic growth, then I would expect markets to continue to rally. If, on the other hand, they are not confident that government action will pay off, then we could be in for even more turmoil ahead.
Dr Ros Altmann
Former government pensions adviser
Sadly, the Pre-Budget Report is just not what we needed. It is just rearranging the deckchairs as the economy continues to sink. Cutting VAT is not going to help much and will cost the Exchequer £12 billion and cost retailers significant sums in changing their prices, catalogues, invoicing etc.
If only more radical measures had been introduced, rather than a continuation of the policy mindset that has led us into this mess.
The Government has not understood why we are in this crisis. The problems stem from obsession with short-term growth and profits, which led to far too much irresponsible spending, lending and borrowing. We will not solve them by yet more short-term attempts to shore up spending using borrowed money.
We need a radical reappraisal of how we run our affairs. Why not take the opportunity to focus on the ageing demographics, needs of pensioners, bloated public spending and obsession with credit and debt?
The budget suggests the Government's attitude is: "We have to do something," but it has not thought through what it actually needs to do for the medium term.
City editor, Daily Mail
The biggest winners are the pensioners and the well-off. The big losers are going to be the upper-income people, which will include a lot of those in the financial community, legal profession and accountancy. The good thing is that the pain will be put off for two or three years, which means that a lot of these people have time to reorganise their affairs to minimise their tax liabilities.
The overall message of the report is that we are in an absolute mess. A lot of the prosperity that we have seen has been built around the financial community in the City, where many of our community are deeply involved. People have become very rich, very quickly but I think those days are over. The go-go years have gone and this budget was the dividing line when we recognise that. The financial system has had an enormous shock and the City is going to be a much harder place to make money over the next ten years.
Restauranteur. Owner of Hush, Villandry and Kitchen Italia
We are still working out how best to pass on the VAT cut to our consumers, which will have some costs for us; the reprinting of all of our menus and getting new till systems, and we will have to see how quickly we can implement these. There's no doubt that we would like to pass on as much as possible, but whether anyone is going to notice a 2.5 per cent cut on their bill is anybody's guess. A £50 bill would mean a difference of £1.25. I don't know if is particularly noticeable.
Analyst at Fathom Financial Consulting and former Bank of England economist
The report was a major gamble. The numbers are fairly staggering - he has raised borrowing to £300 billion. He is doing that because of the crisis. He has acknowledged the recession as more or less inevitable but he is arguing that he is going to soften the blow. But it doesn't seem to me that we are getting much of a bang for our buck.
I think he has tied not just himself, this government or even the next government, but the government after that, too, to an enormous burden. We are not going to get back to balance until 2015 - that's two elections away.
The tax cuts are temporary but the borrowing is permanent. I think it might help at the margins, and you can't accuse him of not trying, but I think the jury is very much out on whether this is actually going to work.
The key points
A cut in VAT to 15 per cent until the end of 2009.
A new higher income tax rate of 45 per cent for those earning over £150,000 from 2011.
An increase in National Insurance rates by 0.5 per cent from 2011.
An increase in pension credit and giving pensioners an extra £60 on top of Christmas bonus.
Help for small firms, with rate relief on empty properties, extra time to pay tax bills, and the abandonment of corporate tax increase.
Child benefit to rise three months early.
£3 bn spending on motorways, social housing, schools and energy efficiency measures brought forward.
Government borrowing reach £118 bn in 2009.