He called it the “unavoidable budget” and went on to issue some severe cuts to spending, which will make up 77% of measures aimed at tackling the national debt compared to 23% from tax increases.
For the NFU, the elephant in the room is just how much Defra’s resources will be cut by and where the axe will fall, with the chancellor declaring that departmental cuts will be increased from 20 to 25% over four years.
However, one positive is the furnished holiday lettings rules will be retained, allowing farmers who provide self-catering accommodation to benefit from favourable tax treatment, and marking a victory for sustained NFU lobbying. The government will consult on how the rules might work in the future, and we’ll continue to press the industry’s case.
The government’s determination to tackle the budget deficit sooner rather than later will mean tougher economic conditions for agriculture.
After April 2012, the annual investment allowance will fall to £25,000. Farmers may want to consider taking advantage of investing before then.
There will be two rates of capital gains with effect from midnight tonight. A rate of 18% will apply to basic rate taxpayers and a rate of 28% for higher rate taxpayers and trusts.
The announcement not to implement the landline levy casts some doubt over the roll out of high speed broadband to rural areas. The government says it remains committed to rural broadband, but leaving infrastructure development in the hands of the private sector leaves questions as to how strong this commitment is. A spending review has been scheduled for 20 October.
NFU president Peter Kendall said: “Given the economic circumstances, farmers might let out a sigh of relief following George Osborne’s first budget. In the face of suggestions that VAT might be extended to food, the annual investment allowance would be abolished, and capital gains tax would be brought in line with the higher rate of income tax, the reality was less painful.
“Nevertheless, there can be no doubt that farmers, along with all sectors of the economy, will face a starker, more challenging environment in which to operate over the coming years. Furthermore, with Defra facing a cut of more than 2% in October’s spending review, the true effect of the chancellor’s austerity measures on farming remains to be seen.”
Source: National Farmers Union
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