Opinion: Budget 2010 unlikely to hit holidaymaker spend

Andrew Burnham, principal, MacIntyre HudsonMr Darling’s 2010 Budget holds off from public sector cuts and immediate tax increases for most of the population, with the short term focus on preserving the delicate economic recovery to protect jobs.

The good news for the majority of consumers is that Darling has taken no action before the election to increase either VAT, Basic Rate Income Tax or National Insurance, which should, together with the stabilisation in unemployment levels, support the summer holiday bookings recovery we have seen since the turn of the year.

The few new tax measures being introduced target the wealthy, with ‘60% of increased taxation coming from the top 5% of earners’ through increased 5% Stamp Duty on £1m properties, tax avoidance arrangements being targeted, and 50% income tax being introduced for those earning over £150,000 income from April 6 2010.

Inflation dropping to 3% has boosted the chances that we will see low interest rates remaining into 2011, which will help to preserve the spending power of many potential holidaymakers.

The news is not so good for the so-called ‘sin’ taxes, with above-inflation rises on alcohol, tobacco and fuel hitting all consumers now and further hikes in the pipeline.

Better news for businesses on rates which will be lowered for a year from this October and on the five-year extension in the ‘Time to Pay’ scheme from Revenue and Customs.

This last measure may well be required for those caught by the increased VAT demands following the Med Hotels case being won by Customs.

Not surprisingly, this has been a largely political budget. But the real tax increases and spending cuts needed to reduce growing public debt have merely been postponed until a likely June budget by the new government.

The outlook for 2011 is not so rosy, with leisure demand likely to be squeezed further through a combination of reduced disposable income after taxes and an expected VAT increase to 20%, which will impact heavily on travel businesses.

Share article

View Comments

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.