leader Editor Lewis Eckett W


ith all the predictability of an England defeat to Germany in the World Cup, the new Chancellor of the Exchequer, George Osborne, stood up in the Commons and


announced a VAT hike to 20%.


Few were surprised and many resigned to the move on the grounds that it is quite clear that we really are in the financial poo. Raising VAT seems an obvious method of tackling the budget deficit we face as a nation. With cuts in public spending and cost-cutting across the board Osborne’s austerity budget has spread the financial pain as wide as possible. In terms of VAT, there’s a compelling counter-


argument that keeping sales tax low actually encourages consumers to spend more. This line has been used for years by the brewing and drinks industry, which argues that less duty would stimulate sales and put more money in the Exchequer’s purse than higher taxation ever would. Ultimately the health lobby scuppered that one. Fortunately, the VAT rise won’t come into effect until January 4th, 2011. So at least there’s a bit more notice than the last time VAT was fiddled about with and in theory there’s six months to prepare, although with Christmas in the way the timescale is effectively a lot shorter. But let’s be honest, it could have been worse. For retail, the announcement of a VAT rise is unwelcome. Anything that puts consumers off spending is bad for business and although there might be some short-term gain in the run up to the festive season, January and February could be brutal.


How will it affect greetings? Well, not much maybe. All through the credit crunch the industry has coped pretty well and stayed relatively stable. Those greetings retailers that are well established, have a clear retail offer and have good systems in place are doing very well thank you. If anything, they will prosper even further if competition is reduced. And the VAT rise might actually be an opportunity for them to raise prices. Greetings cards are so low in price relatively speaking that a difference in the price point as a result of a VAT shift can be quite easily accommodated. So just as many card shops took the decision to ignore Labour’s VAT drop and kept prices the same, this time they might feel the time is right to improve their margin with a price increase. Sounds good in practice, but as ever, such a move has to be carefully thought through with regard to each retailer’s customer base, location,


local competition and retail offer.


Planning will be key and every retailer should use the six month window to get their business in shape. That means a thorough audit of the business, renegotiating with suppliers and landlords and looking for cost-savings to ensure a leaner, fitter operation able to take on the tough times ahead. The good news is that the Government also moved to cut Corporation Tax to 27% (and by 1% annually for the next three years) and cut Small Companies tax rate to 20%. A future rise in the National Insurance threshold was also announced. All this is welcome news for small retail businesses like card shops. Ultimately, anyone in business is out to make a net profit and any tax in the equation is irrelevant because if you hadn’t made the profit you wouldn’t have to pay the tax on it.


Or as my old father use to say: “If you’re paying a lot of tax, you must be making a lot of money.”


Do you agree/disagree? Send your views to: lewis@lemapublishing.co.uk


“The announcement of a VAT rise is unwelcome. Anything that puts


EDITOR’S FAVOURITE I like a clean, fresh-looking photographic card. There’s something uplifting about a vibrant, exciting image set against a stark background that really catches my eye.


Ronnie Bennett is an award- winning photographer and her detailed, still-life images of various fl ora are right on the button. No surprise then that she’s already in John Lewis – and after a showing at PG LIVE, probably in a few more independent stores as you read this.


Apart from the


obvious artistry of the design her cards are highly versatile and surely one of the safest sends around. See Spotlight on P60 for


more details.


consumers off spending is bad for business and although there might be some short-term gain in the run up to the festive season, January and February could be brutal”


www.greetingstoday.co.uk 5


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