A CUT in VAT, help for small businesses and increases to pension credit have received a mixed reaction from those it is meant to benefit.

The Chancellor of the Exchequer’s pre-budget report was cautiously welcomed by businesses and the elderly across Worcestershire as Alistair Darling announced yesterday there is to be a cut in VAT from 17.5 per cent to 15 per cent lasting 13 months from Monday.

He said that would have to be paid for with increases in duty on petrol, diesel, alcohol and tobacco which will offset the reduction so they end up costing about the same. These duty rises will remain in place after VAT returns to 17.5 per cent leaving drinkers and smokers paying more in the long run.

National Insurance is set to rise by 0.5 per cent in 2011 and a new rate of income tax of 45 per cent on incomes above £150,000 will also be introduced then.

Adrian Field, from VisitWorcester – the organisation which manages the city centre – said: “The cut in VAT is interesting and I think it will help certain sectors. That cut will mean a rise in duties so I can’t see a benefit for the pubs and off licences at this difficult time.

“I think fashion stores could be the big winner. I can’t see any big purchases like electrical goods and furniture benefitting from it.”

Mr Field welcomed a temporary increase in the threshold for empty property relief, with empty commercial properties with a rateable value below £15,000 exempt from business rates for 2009/10, and was also happy to see that Revenue and Customs will allow firms facing difficulties to spread payments of all business taxes over an agreed timetable.

Chris Harvey, who is the Chamber of Commerce Herefordshire and Worcestershire’s head of policy and representation, said: “The cut in VAT will be very much welcomed if it is passed on to consumers but we are yet to see if this will actually happen. The £3 billion investments in infrastructural spending is something that we are hoping will have the desired effect and provide a stimulus to the construction industry which is much needed with the economy as it is.

“The increases in child benefit and raising the pension allowance will definitely help, but from a business perspective we need to see more about the details of the £1 billion investment before we can fully comment on it.”

Meanwhile, pension credit is to be increased in April from £124 to £130 a week for individuals and from £189 to £198 for couples. State pensions will increase in line with the highest rate of inflation this year, an increase of £4.55 a week for a single person. Pension and child benefit increases will take effect in January, three months early, and every single pensioner will get a one-off payment of £60 from January, £120 for couples.

Ron Chambers, chairman of Worcestershire Pensioners’ Action Group, said: “Any increase is better than nothing. There are still issues I would like to see investment in such as carers payments.”

He said an increase in duty on tobacco, petrol and alcohol will also affect pensioners.

“If they’re doing that I don’t think it’s going to be of any benefit to them,” he said. “They are giving with one hand and taking away with the other.”