Raising and extending VAT would dampen consumer spending, hit the poorest and fuel inflation, says Melanie Leech
Politics has suddenly become interesting again. None of us predicted a government of the sort that has emerged. So what's in store for food and drink manufacturers?
There is much in the government's work programme for the next five years that chimes with our pre-election calls for policies that will support a successful and sustainable food and drink industry. As the UK's biggest manufacturing sector, we were pleased to see commitments to cut red tape; end the gold-plating of EU rules; stop the planned increase in national insurance contributions on employers; and develop more coherent energy policies.
There was relatively little in the Coalition Agreement relating specifically to food: the introduction of new country-of-origin (and potentially environment) labelling; the grocery ombudsman (which we supported); and new rules for public sector food procurement.
In addition, the food sector should expect an ambitious programme around public health, as Andrew Lansley seeks to bring to life the Responsibility Deal. We look forward to working with him to help co-create this vision for public health. In fact, we look forward to working in partnership right across the new government in a framework that we hope will maximise our significant contribution to the UK economy.
Those discussions will take place against a very difficult economic backdrop. We all expect growth over 2010 to be sluggish and the challenge for government is how to tackle the budget deficit in a way that does not undermine it. And despite the substantial public expenditure cuts across government, and proposed measures such as the quango-cutting Public Bodies (Reform) Bill, the sums still don't seem to add up.
The Chancellor may have found £6.25bn of immediate savings, but some of the new government's other measures mean the deficit has actually increased by a further £10bn. And the foreseeable future remains a scenario of rigorous control of expenditure and the need to maximise revenues to the public purse.
That's why we are watching the debates about taxation carefully and will look for early signals in the Budget this month about the likely future approach of the coalition. David Cameron recently told the Commons that "we are getting to grips with spending so we do not have to put up taxes". One thing clearly not ruled out by that is the prospect of increases in VAT.
There are obvious downsides to a general increase in VAT in the current climate although I suspect everyone can appreciate the logic in increasing the standard rate as currently applied to most goods and services (including a sizeable number of food and drink lines).
But in our view and we have shared all these concerns with the Chancellor in a joint submission with the NFU the real mistake would be extending VAT to all foods. Such a decision would be totally counter-productive; it would dampen consumer spending, disproportionately impact the poorest and fuel inflation. So while we are asking the Chancellor not to increase VAT to 20% we are also urging him to resist all temptation to extend the UK's sales tax regime.
We feel positive about our experiences of the coalition to date and remain confident that our concerns will not fall on deaf ears.
Melanie Leech is director general of the Food & Drink Federation.
Politics has suddenly become interesting again. None of us predicted a government of the sort that has emerged. So what's in store for food and drink manufacturers?
There is much in the government's work programme for the next five years that chimes with our pre-election calls for policies that will support a successful and sustainable food and drink industry. As the UK's biggest manufacturing sector, we were pleased to see commitments to cut red tape; end the gold-plating of EU rules; stop the planned increase in national insurance contributions on employers; and develop more coherent energy policies.
There was relatively little in the Coalition Agreement relating specifically to food: the introduction of new country-of-origin (and potentially environment) labelling; the grocery ombudsman (which we supported); and new rules for public sector food procurement.
In addition, the food sector should expect an ambitious programme around public health, as Andrew Lansley seeks to bring to life the Responsibility Deal. We look forward to working with him to help co-create this vision for public health. In fact, we look forward to working in partnership right across the new government in a framework that we hope will maximise our significant contribution to the UK economy.
Those discussions will take place against a very difficult economic backdrop. We all expect growth over 2010 to be sluggish and the challenge for government is how to tackle the budget deficit in a way that does not undermine it. And despite the substantial public expenditure cuts across government, and proposed measures such as the quango-cutting Public Bodies (Reform) Bill, the sums still don't seem to add up.
The Chancellor may have found £6.25bn of immediate savings, but some of the new government's other measures mean the deficit has actually increased by a further £10bn. And the foreseeable future remains a scenario of rigorous control of expenditure and the need to maximise revenues to the public purse.
That's why we are watching the debates about taxation carefully and will look for early signals in the Budget this month about the likely future approach of the coalition. David Cameron recently told the Commons that "we are getting to grips with spending so we do not have to put up taxes". One thing clearly not ruled out by that is the prospect of increases in VAT.
There are obvious downsides to a general increase in VAT in the current climate although I suspect everyone can appreciate the logic in increasing the standard rate as currently applied to most goods and services (including a sizeable number of food and drink lines).
But in our view and we have shared all these concerns with the Chancellor in a joint submission with the NFU the real mistake would be extending VAT to all foods. Such a decision would be totally counter-productive; it would dampen consumer spending, disproportionately impact the poorest and fuel inflation. So while we are asking the Chancellor not to increase VAT to 20% we are also urging him to resist all temptation to extend the UK's sales tax regime.
We feel positive about our experiences of the coalition to date and remain confident that our concerns will not fall on deaf ears.
Melanie Leech is director general of the Food & Drink Federation.
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