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Calls for VAT reductions met with mixed results

The FSB is calling for the government to use time specific VAT cuts to restore growth in key sectors.

It is hoped that targeted cuts in construction and tourism will drive job creation and boost consumer spending, measures which the government has as yet failed to do.

Ted Salmon, Vice Chairman of the North East England FSB believes these plans would have a positive impact on regional business and would fit neatly into government plans to use SMEs to drive the economic recovery.

He said: “This would be especially beneficial in the North East as these two industries are vital to the local economy, and as public sector cuts roll out over the coming months, this could provide a real opportunity for growth.”

There is also evidence from other EU countries which shows that any revenue lost by making VAT cuts will be met by earnings from additional demand, jobs and the wider economic activity.

Ted also believes that these moves would be especially beneficial if the government formulated individual regional strategies to encourage growth in the economy.

“For example, if they were to also include green and renewable technology sectors with construction and tourism in VAT reduction measures, this would promote R&D and graduate retention as well as construction and upgrade the efficiency of the housing stock at the same time,”

“Tourism also supports many jobs in the North East, so as “green” tourism becomes more de rigueur, developing and promoting it makes that sector more secure for the Region as well.”

However, James Ramsbotham, Chief Executive of the NECC is unconvinced by these findings. He said: “ There is a lack of strategic understanding around these measures. Tourism and construction are both flourishing in the region, so we should focus on incentives to grow this business further rather than lowering costs.“

FSB figures show that businesses were less confident in the second quarter of 2011 than they were at the start of the year as the FSB “Voice of Small Business” Index fell by 6.4 points in the first quarter.

This was posted in Bdaily's Members' News section by Ruth Mitchell .