Retailers: Budget must focus on spending cuts - not tax hikes

2 March 2010

The last budget of this Parliament must concentrate on public spending cuts, rather than tax increases, said the British Retail Consortium (BRC).

Ahead of next month's expected Budget, the BRC's submission to the Chancellor makes clear retailers believe Government moves to deal with the budget deficit should prioritise cutting non-essential public spending over tax rises – or risk a return to recession.

The BRC's Budget submission, published today (Monday), says:

"The key challenge for the Government in the Budget is to outline a credible plan for addressing the fiscal deficit without precipitating a ‘double dip' recession…A significant focus must be on driving efficiency and productivity in the public sector…there is a need to review all options, including ceasing areas of activity …and de-commissioning services that Government can ill afford to continue."

Stephen Robertson, British Retail Consortium Director General, said: "The size of the country's deficit means action must be taken. To nurture our fledgling recovery, the main tool for dealing with the deficit has to be cutting non-vital public sector spending.

"Some tax rises maybe inevitable, but no Government should rely on tax hikes to reduce borrowing. The increases would have to be so large that customers' ability to spend would be wrecked – risking a double dip recession."

In addition to tackling the public finances, the BRC Budget Submission identifies other key themes to help retailers play their part in achieving a return to sustainable economic growth:

1) People - Reducing employment costs
Retailing is one of the UK's biggest employers with nearly three million people working in the sector. But retailers' ability to maintain and create jobs risks being undermined by increases in employment costs. The one per cent increase in National Insurance, for example, will cost retailers an extra £220 million. This equates to almost 15,000 employees on an average retail wage.

The BRC is calling for:
- The one per cent increase in National Insurance planned for 2011 to be scrapped
- This year's National Minimum Wage increase to be no higher than one per cent

2) Places - Reducing property costs
The need to be close to customers means the retail sector requires the right premises in the right locations. But this means they are disproportionately affected by property cost rises. Retailers already pay a quarter of the £23 billion in business rates in England – more than any other sector. This April, as a result of the five-year revaluation, retailers across the UK face hefty increases. One retailer, for example, is facing a 9.3 per cent increase just as a result of the revaluation.

In addition, many retailers will also have to pay the deferred part of the inflation-busting 2009 increase postponed from last April. This is on top of the Business Rate Supplement (BRS) introduced in London to pay for Crossrail.

Last year, local authorities in England and Wales were given the power to add extra costs to business rates through BRS. The BRC has continually warned safeguards in this area need to be strengthened.

The BRC is calling for:
- Affordable increases in business rates
- Businesses affected by BRS to have a legal right to vote down any BRS plans that will not deliver adequate local economic benefits
- An extension to the temporary Empty Property Rate Relief, allowing more empty properties to qualify for an exemption to business rates until 2012

Stephen Robertson, British Retail Consortium Director General, said: "Retailers are vital to jobs. Retailing is the UK's largest private sector employer. We'll be leading the UK into recovery. It's crucial this Budget gives us the support we need to maintain and create jobs and doesn't pile on damaging new costs."

In its Budget submission the BRC is also calling for the Government to:

- Provide more incentives to encourage businesses to use renewable fuels and technologies
- Extend the boiler scrappage scheme to other inefficient household appliances – with financial incentives for the most energy efficient models
- Introduce measures designed to stimulate business investment and economic growth

The BRC's full Budget Submission is available at:
www.brc.org.uk/downloads/brcbudgetsubmission2010.pdf

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