AN INTERVIEW WITH STEVE ELWOOD
Steve Elwood, Head of Food & Agriculture, Smith & Williamson and Chairman, EFFP
The imperative for the Budget was to convince the credit ratings agencies and the bond market that it was a credible fiscal deficit reduction programme. This was unfortunately not a budget about encouraging innovation. While 77% of the deficit reduction will come from cuts in real spending, 23% will stem from higher taxes.
The spending cuts will be the deepest and longest since 1948. A 25% reduction in DEFRA’s budget by 2014/15 could have a materially detrimental impact on the agri food sector.
Perhaps the main headline was the decision to increase VAT to 20% next January. Thankfully, most foods remained zero rated. VAT has the advantage of bringing in large amounts of money quickly and being collected at source by the businesses.
The income tax personal allowance will be increased by £1,000 to £7,475 for 2011/12, with the promise that it will rise to £10,000 over time. This is good news for basic rate taxpayers, but the basic rate limit is to be reduced so that higher rate tax payers do not benefit, or indeed they could potentially be worse off.
Capital gains tax rates were increased for higher rate taxpayers from 18% to 28% from midnight on Budget day. The increase of Entrepreneurs’ Relief (ER) from the first £2m of lifetime gains to £5m will be a welcome boost to entrepreneurial activities in the UK. This should encourage investment in the food and farming sector.
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