Budget 2012 round-up: City counting the cost

Ross Innes and Dionne Froude with son Lewis. Picture: Jayne Wright
Ross Innes and Dionne Froude with son Lewis. Picture: Jayne Wright
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BUSINESS leaders in Edinburgh today called for a reduction in VAT for the city’s tourism industry in the wake of the UK Government’s Budget.

They said Chancellor George Osborne had set an important precedent by introducing a special cut-price five per cent VAT rate for ski lifts – and they argued the hospitality sector in the Capital would benefit from similar special treatment.

While the ski lift measure may have been little noticed outside of the north of Scotland, Graham Birse, policy director of the Edinburgh Chamber of Commerce, said it was a positive move.

He said: “In acknowledging that a reduction in VAT helps businesses like Scotland’s ski lifts, the Chancellor has established a precedent which we will be watching very closely.

“He is accepting there is a correlation between VAT relief in certain sectors and an improvement in their performance.

“Think of the difference it could make to Edinburgh’s tourism and hospitality sector if it had five per cent VAT. That’s what they have in France and we would like to see the same here.”

Elsewhere, there was a widespread welcome of the Chancellor’s announcement of up to £11 million for high-speed broadband in Edinburgh, which will see free wi-fi zones across the city centre. The city council said more than 90 per cent of Edinburgh residents and businesses would have access to high-speed broadband by 2015.

Mr Osborne also announced a tax break for the computer games industry – a measure originally introduced by Labour’s former Chancellor Alistair Darling in his final Budget but then scrapped by the coalition.

Mr Darling, MP for Edinburgh South West, welcomed the U-turn.

He said: “It’s a sector in which Edinburgh firms are involved, so it’s good news for the city.”

But Mr Darling said the Budget as a whole would leave a lot of people on middle and lower incomes worse off.

He said Labour had introduced a higher rate of personal allowance for pensioners, which the Government was now freezing until everyone else caught up.

“We calculate that 4.5 million pensioners who pay income tax will be £75 a year worse off from April.”

He accused Mr Osborne of having “the wrong priorities” in cutting the top rate of income tax from 50p to 45p.

He said: “He says it’s only going to cost £100m but, if you look at the Treasury calculations, the first thing that strikes you is that he is losing £3 billion in the first year and they just hope to get it back by closing various loopholes.”

The Government claimed it was imposing other taxes on the rich, including seven per cent stamp duty on houses over £2m.

Michael Dixon, East of Scotland chairman of the Federation of Small Businesses, welcomed the earlier than expected cut in corporation tax.

He said: “Small businesses are the backbone of the Edinburgh economy. The intention to harmonise corporation tax rates and income tax rates will go a long way to levelling the playing field between sole traders and limited companies.”

Meanwhile, David Hinnricks of the Edinburgh Hotel and Guest House Association backed the call for a lower VAT rate for the tourism industry.

He said: “When you look at other countries with a two-tier system to help tourism flourish, it would help us a lot. This is the worst winter we have had in 20 years.”

However, Edinburgh Western SNP MSP Colin Keir criticised the Chancellor for going ahead with the planned ten per cent rise in Air Passenger Duty.

The SNP and Scottish airport operators had called for the UK Government to cancel the increase.