The Farmers' Union of Wales' today gave the new Chancellor's budget a guarded welcome while stressing that it is still early days and only with time will the farming industry be able to assess the impact of cuts in the public sector.

However, the union praised the Chancellor's reintroduction of Furnished Holiday Lettings (FHL) tax allowances. "The FUW has campaigned vigorously for the reintroduction of FHL tax allowances because scrapping these benefits would have seriously affected the income of many of our members who have diversified into letting out holiday accommodation," said the union's business development director Emyr James.

"Some of them have done so after acting upon past government advice which encouraged diversification into the tourism industry. Today's announcement will come as a welcome boost for both the agricultural and tourism business in Wales."

The Union was also pleased to see no further increases in fuel duty following the last increase in March.

"Another increase today would have had a direct impact on the cost of production at a time when the country needs business to flourish," said Mr James.

The Chancellor's intention to increase VAT to 20% should not directly impact upon the agriculture sector as food is to remain exempt. "But in wider terms it could pose a cash flow problem for some farmers and affect the consumer''s disposable income available to spend on purchasing better quality cuts and products," said Mr James.

Another worry for the industry would be the further government departmental cuts announced by the Chancellor. Mr James added: "Time alone will only tell whether these departmental cuts, which include DEFRA, will have a direct impact on the agricultural industry in Wales.

"One thing is for sure, it is imperative that the economy continues to grow so that we can trade ourselves out of this recession."