Pre-Budget report met with channel criticism

Resellers unhappy with VAT reduction and planned increase in NI contributions

Backlash: Channel players claim the government's pre-Budget report merely postpones problems

Channel players have reacted with disdain to last week’s pre-Budget report and slammed the 2.5 per cent VAT cut as little more than a feckless political points winner.

Chancellor of the Exchequer Alistair Darling claimed he expected gross domestic product to fall by between 0.75 per cent and 1.25 per cent next year and labelled his report a “£20bn fiscal stimulus”.

Henry Edjelbaum, managing director of business finance specialist ASC Finance for Business, called the drop in VAT from 17.5 per cent to 15 per cent an “an ill-conceived headline grabber.”

“If businesses have to re-price everything, it will be a nightmare. The administrative burden placed on them is astonishing,” he said.

Phil Jones, UK sales and marketing director for printing vendor Brother, was similarly exasperated.

“It is a sticking plaster that will eventually reveal an economic wound,” he said. “I fail to see how it will help sales. All it does is give the channel a short-term headache.”

Other measures unveiled include £4bn given to banks for small-business loans and the deferral of a one per cent rise in small firms’ corporation tax rate. Darling also announced plans to allow companies to set a timetable for tax payments and the introduction of a tax-relief threshold for empty properties.

Shaune Parsons, managing director of VAR Computer World Wales, poured scorn on the suggestion the report was business friendly. “All the VAT cut does is kill off the retail trade for a week. This report does nothing for businesses,” he said.

Parsons also slammed the 0.5 per cent increase in companies’ national insurance contributions, planned for April 2011.
Plans to find £5bn of public-sector savings through efficiency measures were also announced.

Integrator Logicalis’ head of solutions Chris Gabriel said: “VARs will have to rethink how they engage with customers. It is a challenge and an opportunity ­ we are trying to engage with the public sector in the way we engage with the private sector.”