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Will VAT increase help or harm the economy?

08:36 UK time, Tuesday, 4 January 2011

The top rate of VAT has gone up from 17.5% to 20%. Will it help tackle the budget deficit?

In an interview with the BBC, Chancellor George Osborne said that the increase was a "tough but necessary" step towards restoring the UK's economy.

However business groups have warned that retailers will be hit by the increase. There are also concerns that the poorest sections of society will be hit hardest.

Is the government right to increase VAT? What impact will the rise have on your personal finances? Do you run your own business? How are you coping with the changes?

This debate is now closed. Thank you for your comments.

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Comments

Page 1 of 19

  • Comment number 1.

    I can't see any conceivable way in which a VAT increase can "help" the economy. It's there to put more money into the hands of Government. Apparently the law of diminishing returns they seem to think operates with regard to increasing rates of income tax doesn't apply to taxes that rely on people buying things. What an odd thing for very wealthy people to think, eh?

    So, will it hurt the economy? On its own, in terms of people buying stuff, probably not much. But set alongside wage freezes, rapid rises in fuel costs and energy costs (both of which will feed into wider inflation) It may cause rather more damage than one might anticipate from its size.

  • Comment number 2.

    We had building work carried out within the last three years. A few trips with our builder to various merchants revealed people turning up with HUGE bundles of cash, clearly avoiding VAT.

    There is an issue with tax evasion.

    However, if people consider that they are being unfairly taxed (or they do not agree with what their taxes are being spent on) I think we will only see an increase.

    Just a thought - I wonder if MORE revenue would be created if VAT were to instead be reduced....

  • Comment number 3.

    Of course it will help but it could be avoided if for instance we stopped all overseas aid for five years, stopped payments to asylum seekers and illegal immigrants and refused to pay another penny to the EU until their accounts had been approved and signed off.
    The effect it will have on our feckless society will be to increase the personal debt crisis, they will not stop spending in this must have world, they will simply borrow more.

  • Comment number 4.

    This the first really big hit of the coalition's financial strategy.

    The papers state it will effectively take £2.2bn out of the economy.
    How it can fail to affect spending and public morale is beyond me?
    The economy will probably start to unravel after 6 months.
    The only good news in the last 12 months appeared to be as a result of Labour's action on the economy.
    Unemployment is already rising without the public sector cuts impacting. Inflation will rise as a direct result of this. Tax revenues may actually fall as a result of the VAT increase. Interest rates are due tio start rising.
    This could then mean deeper cuts to public expenditure.
    Happy New Year!!!!

  • Comment number 5.

    It will certainly help to reduce the budget deficit.

    When we are talking about an increase in cost of goods of £25 per £1000, I have to say that I think all the talk about how hard people will be hit by this rise is a lot of hyped up nonsense.

    I am one of the 'poor' that this is supposed to hit the hardest and I really see it having very little effect on me.

    It really does the Labour Party no credit to bitch about this when it is largely their profligate spending that put us here in the first place.

  • Comment number 6.

    No, they are not right to increase VAT. This is just the start of the Tory regime of putting up taxes repeatedly. If we rollover and take this, they will try their luck again and again!

    We paid off the banks before, and now we have to pay for the same thing again! Why not sell the shares in the banks we now own? The government should not be waiting for the share price to go up, if they are worth more than we bought them for, sell them! it doesn't matter who buys them, nothing is really owned by us anymore anyway.

    We are being squeezed to to point of bankrupting the very people who had to pay for this in the first place...us!!! George Osbourne and David Cameron are obsessed with clearing a debt in full asap to achieve what? will we get a tax break when the deficit is paid off? will VAT be lowered? of coarse not.

    What if retailers do get hit hard by this, we'll have more unemployed people needing to claim from the state, and be made to feel like scroungers for doing so! People are going to have to start borrowing more to maintain their life styles, and we all know where that will lead.

    But of coarse, people could change their lifestyles, which is possibly what the Tories want. If you're poor, it's your fault and you should suffer. If you're rich, you must of earned it and should therefore be rewarded for it. It's the 1980's all over again, except this time, we don't have anything left in the public sector to sell off, or do we, the NHS perhaps?

  • Comment number 7.

    Will VAT increase help or harm the economy?
    It looks like a daft question because a VAT rise will take money out of the economy so could not possibly help. But then if you consider that it is reducing our government debt there could be a long term benefit from this.

  • Comment number 8.

    When will the British public get it through your heads whatever those in parliabent do does NOT effect them any increases they apply to us we pay for, for them.
    There should be a new entry in the Oxford Dictionary:-
    Scrounger/leech

    See POLITICIAN.

  • Comment number 9.

    Increase in spending boosts the economy.
    Increase in VAT will increase prices and therefore would lower demand.
    Spending will lessen as a result, which will not help the economy.
    Therefore it'll harm the economy than do good.

    But this is Cameron. The Tories want to privatise everything and have us rely on greedy profit/bonus/money grabbing people for jobs (who cares more about their own bank account than helping others) and increase prices. He's making the country practically insufferable to live in. How are poor people/unemployed people supposed to get by is beyond me. Jobs are hard to find and unemployment's increasing. It's like the cup's so full it's not spilling in terms of people, jobs, money, economy, etc. Cameron's not helping the problem, he's making it worse.

  • Comment number 10.

    Is the government right to increase VAT?
    Yes, it needs to reduce the deficit and increasing taxes is one way of doing so.

    What impact will the rise have on your personal finances?
    Very little. The rise in VAT will be offset by the increase in the standard personal allowance on income tax in April.

    Do you run your own business?
    No.

    How are you coping with the changes?
    Quite easily.

  • Comment number 11.

    In the short term VAT will surely boost the government coffers and towards offsetting the current deficit. In the longer term it will of course be inflationary simply because part of our tax is used for gratuitous none economy stimulating purposes. Economic stimulation is the absolute priority. In addition, downsizing our population, national aspirations and the pension expectations of the greater population in imperative. Even after the social conditioning of the last 18 months there is still a mood afoot that everything will return to normal in good time. Sadly, the world has changed and we must expect the wealth we might expect to be taken by nations in the world who are gathering greater economic power.

  • Comment number 12.

    If everyone for say the month of febuary refused to buy any item on which vat is charged over 100 pounds the loss of revenue to this government would make them rethink policy all the tax rises that have and will come affect the poorest more than the rich friends of cameron and co. Pity this will not happen like the poll tax opposition the majority will pay and moan time for action or to be quiet and accept the rise.

  • Comment number 13.

    Unfortunately the legacy of debt left by labour needs to be paid for and this is a relatively pain free way of raising desparately needed funds, a 2.5% increase in VAT is an extremely small amount. £2.50 per £100 so i do not see how this will have a massive impact on the economy where NI or taxs increases would impact whether employers grow and recruit and this would have a massive impact on the economy.

    Before we get the standard the rich should pay more taxes response, would you work if you paid 50% tax with additional NI contributions too, of course not. The pain needs to be spread evenly, and its about time those that take more, generally those on benefits and low income, paid more too for the services they use.

  • Comment number 14.

    After the spending spree of labour and the huge debt left behind it was obvious that more money was needed and tax was the way it would be done. Labour liked stealth tax which upsets the country more because they are found out and exposed.

    I read some informed and skilled reporting on this tax increase which analysed it against other forms of tax rises. VAT was actually the only viable way to raise more money without making businesses leave and causing more harm than good. The best way to increase tax with minimal disruption was by icreasing VAT.

    There are bound to be a lot of people unhappy with this and the tuition fee and public sector job losses. I recommend you take this up with the people responsible. Go see the labour MP's you previously voted for and ask why they are not contributing their earnings to pay for the damage they caused/allowed.

  • Comment number 15.

    6. At 09:38am on 04 Jan 2011, Ben wrote:

    No, they are not right to increase VAT. This is just the start of the Tory regime of putting up taxes repeatedly. If we rollover and take this, they will try their luck again and again!
    ------------------------------------------------
    I think you'll find that raising taxes goes against Tory policy. They have in the past been very anti tax rises whereas raising taxes is a Labour indulgence, so to say that it is a Tory regime to repeatedly increase tax is somewhat wide of the mark. They are having to increase tax to pay off the mess Labour left us with even with their record tax revenues of the past 13 years.

  • Comment number 16.

    Is the government right to increase VAT?

    They have been elected, so its up to them to try and get things back on an even keel.

    What impact will the rise have on your personal finances?

    We will be paying another 2.5% on vatable stuff. So the traders will be getting 2.5% less.

    How are you coping with the changes?

    OK and not moaning like may, after all it is idiots borrowing what they could not afford that has caused most of the problems, including incompetent government ministers.

  • Comment number 17.

    It will help the ever burgening tax take, end of. Its hardly likely to help the Economy. Certainly not the affluence of Middle England. The knee jerk will probably be reduction retail spending.
    It is also certain the rate will not reduce again when the debt is under control. Government has been looking for a plausible ecuse to bring our VAT into line with mainland Europe. At the next crisis it will go 22.5% and so onward & upward. I suppose next the local rates (more tax) will go up March April to make up the 10% shortfall in Government grant. Still we don't get the roads repaired or bins emptied. Never mind we got an ethnic minorities welfare officer and support staff.

  • Comment number 18.

    10. At 09:45am on 04 Jan 2011, Magi Tatcher wrote

    What impact will the rise have on your personal finances?
    Very little. The rise in VAT will be offset by the increase in the standard personal allowance on income tax in April.

    ---------------------------------

    If this were actually true, then why bother increasing VAT?

  • Comment number 19.

    I'm in favour of VAT as a tax and I'd like to see it used more and have us drop a load of the other taxes instead.

    Although I'd welcome any other system that simplified the UK tax rules too.

    However, as to whether it will help or hinder the economy at the moment is unknown. It will raise money to pay the debts Labour ran up but there's always a risk it might stifle buying. On balance, I think it's a small enough increase that it won't stifle buying too much and after an initial 'hit' I think its effect will fade.

    Of course, if the government wanted to make a real dent in the national debt it would go after the rich tax evaders and plug the holes used by the corporate tax avoiders. That would pay off 3/4 of the national debt.

    Then again, doing that might harm some MPs' chances of securing directorships on company boards when they quit politics, so it's probably a non-starter.

  • Comment number 20.

    My objection to the VAT rise "to reduce the budget deficit" is that you can bet your bottom dollar that when the deficit has been reduced, VAT won't come down again.

    My objection to VAT in general is that my spending money has already been taxed through income tax, and VAT taxes already taxed money. It's a bit like taking out insurance to insure your insurance. We are all mugs.

  • Comment number 21.

    The VAT increase is one of the measures implemented to decrease OUR countries deficit rapidly and will ultimately bear fruit for the British people as we repair the terrible state of OUR finances left by the last incompetent 'government'. The FT report today shows that the measures taken already and that are in the pipeline, are already showing positive results.
    How anyone can take notice of La La Labour spinners and hypocrites who got us in this huge mess.
    My biggest concern is the measures being taken address the DEFICIT but what about the £4.8 TRILLION of DEBT that Labour's criminal negligence left us (or our children and grandchildren) with.

  • Comment number 22.

    Of course it will help tackle the budget deficit. How else do you stop spending more than you earn apart from earning more (increasing taxation) and/or spending less? This VAT increase only brings us into line with most other European countries. Ed Milliband is absolutely clueless and opportunistic. He was part of a government that introduced 80 separate tax increases (many of them stealthy), during a booming economy and STILL managed to run a budget deficit, even before the financial crisis. Over the medium term the budget has to be brought back broadly into balance. Once it's in balance then I would hope that the government could start thinking about reducing the overall tax burden instead of seeking new ways to waste...I mean spend it.

  • Comment number 23.

    It is a modest increase in taxation - what cost £117.50 before will now cost £120 (if it was subject to full VAT), so big deal. It does not affect food or children's clothes or gas and electricity. We have to reduce the deficit by spending less but also by taxing more and the choice there is between VAT or basic rate income tax. Nothing else will have the necessary impact. Yes it takes more money out of our pockets, but that is what it is meant to, and has to, do. VAT registered businesses do not pay VAT themselves so it seems very unlikely to have a significant effect on business. Of course it will push up inflation but that is mere statistics - it is not demand led inflation so in a sane world it should not increase pressure for interest rate rises. We are in a financial mess and there is no easy alternative, despite the mischievous and irresponsible misinformation from Ed Miliband and his friends.

  • Comment number 24.

    This coalition of the right has decided, for idealogical reasons to cut the size of the deficit in 4 years, rather than over a longer period.
    It is idealogical as they have announced no measures to recover the £25 billion a year lost to HMRC through tax evasion and tax avoidance or recover the £100 billion in unpaid back tax either. In fact Osborne wrote off Vodaphone's £6 billion in unpaid tax.
    VAT is a regressive tax as those on lower incomes pay more in real terms than the better off.
    They are using the deficit as the excuse for their small state agenda, the Lib-Dems are taking the flak and the 'NuLabor mismanagement' mantra provides the reason.
    The reality is, the ending of public sector provision and it's replacement by the private sector was laid out in the Tories position papers published in 2008. They were going to do this no matter what state the economy was in. Paradoxically, the credit crunch enables them to cut deeper and faster than the could have otherwise.

  • Comment number 25.

    Just as intended, this will hit hardest on the poor. This isn't government, it's vandalism.

  • Comment number 26.

    Geez when did this happen? Anyways, I am not in britain this will hardly affect me.But in case it may affect me, now, I concentrate and I try to think like a brit determined to shop... and I see that it is impossible with or without VAT.penny pinchers.

  • Comment number 27.

    It might help the debate if an organisation as large as the BBC could at least get its figures right.

    They talk of goods previously costing £200 as now costing £205. No they won't. If goods previously cost £200 then the VAT exclusive price was £170.21 and the new price will be £204.25.

    OK. it's a small difference but since the gloom and doom merchants seem to think even the tiniest difference will bring the economy grinding the a halt then the BBC ought to be getting those tiny differences right.

    Besides, if the BBC tell people to expect a jump in price from £200 to £205 what's the stop a crafty shop-keeper doing just that and pocketing a little extra profit?

  • Comment number 28.

    13. At 09:49am on 04 Jan 2011, Lee wrote:

    Unfortunately the legacy of debt left by labour needs to be paid for and this is a relatively pain free way of raising desparately needed funds, a 2.5% increase in VAT is an extremely small amount. £2.50 per £100 so i do not see how this will have a massive impact on the economy where NI or taxs increases would impact whether employers grow and recruit and this would have a massive impact on the economy.

    Before we get the standard the rich should pay more taxes response, would you work if you paid 50% tax with additional NI contributions too, of course not. The pain needs to be spread evenly, and its about time those that take more, generally those on benefits and low income, paid more too for the services they use.

    ----------------------------------------------

    A comment about higher rate tax payers and benefit claimers, i was wondering when this was going to come up.
    It is not 50% on their earnings, higher rate tax payers only pay the higher rate tax on earning over the threshold, you are mis-leading people into believing that someone who earns £70K a year pays £35 in tax and NI, NO THEY DON'T!
    AS for benefit claims, if you work for 20 years and get laid off because of no fault of your own, you have paid into a system that is designed to support you regardless of whether or not there are millions of people claiming. People should not have to feel ashamed of claiming benefits, constantly bringing this subject up make those who genuinely need the help feel ashamed of claiming and so go without!
    As for this government leaving a debt, the only reason the previous Tory government managed to get by without causing a huge deficit was because they sold off all public services to put money in the treasury!!!

  • Comment number 29.

    Well, in December 2008 when Darling reduced VAT by 2.5% for one year the consensus on HYS was that it would have no impact, so raising it by 2.5% should have no effect, then?

  • Comment number 30.

    Is the government right to increase VAT?
    Yes. We need to get this deficit down as quickly as possible.
    Do you run your own business?
    Yes. Will it affect me as a business. Ultimately it will affect all of us.
    How are you coping with the changes?
    I actually find it easier to calculate 20% of the Net amount to give me the Gross.

    To be honest I never really understood why Labour reduce the VAT down to 15%, only to raise it back up agin. Did they really, honestly think people were going to spend? Unlike the Government, who seemed to think they could continue to spend what they didn't have, businesses can't.

    Labour are stating "It's the wrong tax, at the wrong time". Okay then. What is the right tax for now? Haven't heard anyone tell us that yet.

  • Comment number 31.

    This is the medicine for the illness caused to our country by Zanu Labour. It's long overdue.

  • Comment number 32.

    9. At 09:44am on 04 Jan 2011, U8860545 wrote:
    Increase in spending boosts the economy.
    Increase in VAT will increase prices and therefore would lower demand.
    Spending will lessen as a result, which will not help the economy.
    Therefore it'll harm the economy than do good.
    -----------------------------
    And Labour's increase in NI would have hit job creation, which would have kept unemployment higher, reducing the spending power of people in the economy, etc. Nobody ever likes tax increases but I just wish you left wingers would listen to the folly of your own rhetoric sometimes. The last Labour government were running a large structural deficit (despite 80 separate tax increases) even before the financial crisis. This is just pure greed and selfishness, stealing from the next generation to pay for the over-indulgence of today. As poster 10 states above, the effect on the poorest will be offset by the increase in personal allowance in the next tax year.

  • Comment number 33.

    It will help towards the extra 2-5 billion it will cost to ensure private enterprise takes over the PCT and have control of who gets hospital treatment. The make-what-you can brigade are rubbing their hands at getting control of the health service budget.
    The country is rotten to the core.

  • Comment number 34.

    "18. At 09:56am on 04 Jan 2011, Ben wrote:
    10. At 09:45am on 04 Jan 2011, Magi Tatcher wrote

    What impact will the rise have on your personal finances?
    Very little. The rise in VAT will be offset by the increase in the standard personal allowance on income tax in April.

    ---------------------------------

    If this were actually true, then why bother increasing VAT?"

    The rise in personal tax allowances will only benefit basic rate tax payers not those on higher rates. The increase in the PA will be worth £200 a year to a basic rate taxpayer, equalling some £8,000 a year of VAT exclusive goods. So, basic rate taxpayers are cushioned against the VAT rise whilst higher rate taxpayers will not be.

    I thought that's what the left would have wanted and so they would be applauding this measure instead of Miliband's 'sound bite' whining without any hint of what he'd do instead.

  • Comment number 35.

    As usual ridiculous hysteria being created by the media about the effects of this vat rise. Most people won't even notice a few pence here and there, so stop trying to make it like the government have doubled prices overnight. Compared to a lot of countries and communities our goods are the cheapest around so it’s time to put greed behind us and work to help our country. Now we need an upward move on interest rates, unbelievable why that has remained so low for so long and yes I do have a good size mortgage.

  • Comment number 36.

    5. At 09:37am on 04 Jan 2011, john33 wrote:
    It will certainly help to reduce the budget deficit.

    When we are talking about an increase in cost of goods of £25 per £1000, I have to say that I think all the talk about how hard people will be hit by this rise is a lot of hyped up nonsense.

    I am one of the 'poor' that this is supposed to hit the hardest and I really see it having very little effect on me.

    It really does the Labour Party no credit to bitch about this when it is largely their profligate spending that put us here in the first place.

    ---------------------------------------------------

    And here are the actual facts. National debt, as a proportion of GDP, FELL consistently year-on-year between 1997 and 2004 -that's more than half the time Labour were in office. Between 2004 and 2007 it rose, but was still well BELOW the level they inherited in 1997 - hard to see where the charge of "profligacy" can be applied.
    Public debt skyrocketed in 2007. What happened then? Oh yes! - the banks went belly-up and needed vast amounts of public cash to bail them out. THAT is what put us here in the first place.

    And how are the bankers doing now?

  • Comment number 37.

    I didn't feel particularly richer when VAT was dropped from 17.5% to 15% and it didn't change my shopping habits. I don't suppose I'll feel particularly poorer now its gone from 17.5% to 20% and I don't suppose my shopping habits will change.

    All it has really done is bring VAT more into line with the rest of Europe anyway.



  • Comment number 38.

    This VAT increase defies logic. Folk aren't going to have anything in their purse to spend on things they used to buy. Our petrol price alone is now about £1.45 a litre.

    It's very apparent that this government has total disregard for people living on limited incomes, but will nibble away even at that to help replenish their coffers with bankers still getting away with daylight robbery.

    Am watching to see when the unemployment numbers rise thanks to a lack of forward thinking by the government. Osborne drones on about being tough and how we're all in this together. No we're not. The rich won't be scrimping and saving to pay bills.

    Off to get in queue for a little Eriskay pony and trap. At least the roses will benefit.

  • Comment number 39.

    It will help because it will help to fill the terrible financial vaccuum left by the last Government.
    However, I will be curbing my spending from now on and the major items I had planned for this year (fitted wardrobes, conservatory) will be put on hold indefinitely. We have also decided to only take 1 holiday this year, even though prices are at pre-VAT-introduction levels (it is the anciliary costs that make it more expensive). So, in effect, we will not be helping the recovery as we will not be spending.
    Good luck to the Coalition, they have a terrible mess to clean up.

  • Comment number 40.

    30. At 10:07am on 04 Jan 2011, martin622 wrote:

    To be honest I never really understood why Labour reduce the VAT down to 15%, only to raise it back up agin. Did they really, honestly think people were going to spend? Unlike the Government, who seemed to think they could continue to spend what they didn't have, businesses can't.


    I don't know what they were thinking but the VAT decrease, and their other stimulus measures, cost them (us) £25 billion.

  • Comment number 41.

    The only way this increase can be acceptable is if the £13bn the administration claim it will raise will be ring-fenced and used towards meeting their duty towards the citizens of this nation and not spent on anything else whatsoever.

    The obligations incurred by asking for more money must be met. No longer can our money be wasted to the profit of the mediocre, the greedy, the self-serving, the dishonest and corrupt. If the administration wants ANY money from the citizens it is paid to serve, they must prove that it will be used to their benefit, in the provision of the services for which it is given.

  • Comment number 42.

    The big picture.
    The Government know that the country must make more or go bankrupt, whatever the taxes are. In order to make more peoples spending power has to be made as low as our Chinese competitors. Cutting wages directly causes strikes. Cutting wages by increasing taxes forces more people to take jobs for less money in order to live. There will be many more ways to lower the spending power of your wages coming along. From higher inflation with a wage freeze to higher taxes and charges. Only the poor and middle incomes are really badly affected you wil note.

  • Comment number 43.

    I guess it will hinder my economy. Charged on everything bar books, food & childrens clothes I imagine my buying power reduces about 2% overall. In itself not a big deal the disasterous deficit left by the last lot needs paying off. Sadly this Tory adminstration found after doing it once already there were no more national assets to strip & sell to pay this one off. Not unless they really dig deep and get creative Pssst..anyone want to buy a Coastguard business, or a slightly shop soiled Army with a full order book? So smile & pay. Trouble is the rate at which other taxes keep escalating too.

  • Comment number 44.

    I run a small business, our largest expense is on fuel (diesel), as we are now facing the highest fuel prices in europe how do we compete when we all sell in the same market place.
    After agonising long and hard over the projected figures we are certain that we will reduce our work force to cut costs. A little off topic but unless fuel prices see a 30 pence per litre drop in price, massive damage will be done to any recovery.
    To the people that keep saying food is zero rated, how do you think it gets to the shops, there is no such thing as totaly VAT free, there is a VAT content built in somewhere.
    It has now been said that this VAT increase will remain ie, it is a structual increase, that will bring us into line with Europe, is that a good thing they are having the same problems.
    The way out of our problem is to sell more, make more and the you will employ more meaning lest spent on unemployment, you can not expand the economy by stifeling it.

  • Comment number 45.

    The rise in VAT is expected to raise approx £13bn, according to analysts. How much do we give away in Foreign Aid annually?
    Oh yes..... £12-14bn!!!!!
    Scrap Foreign Aid and keep VAT at 17.5%. Or is that too easy?

  • Comment number 46.

    22. At 10:00am on 04 Jan 2011, suchan104 wrote:
    Of course it will help tackle the budget deficit. How else do you stop spending more than you earn apart from earning more (increasing taxation) and/or spending less? This VAT increase only brings us into line with most other European countries. Ed Milliband is absolutely clueless and opportunistic. He was part of a government that introduced 80 separate tax increases (many of them stealthy), during a booming economy and STILL managed to run a budget deficit, even before the financial crisis.

    ----------------------------------------

    "Before the financial crisis" public sector debt, as a proportion of GDP, was significantly LOWER than it was in 1997 when Labour came to power.

  • Comment number 47.

    18. At 09:56am on 04 Jan 2011, Ben wrote:

    10. At 09:45am on 04 Jan 2011, Magi Tatcher wrote

    What impact will the rise have on your personal finances?
    Very little. The rise in VAT will be offset by the increase in the standard personal allowance on income tax in April.

    ---------------------------------

    If this were actually true, then why bother increasing VAT?


    Because not everyone is a standard rate income tax payer.

  • Comment number 48.

    I doubt for lower priced items it will make little difference. The “it will hot the poor hardest” is rather scaremongering. It’s rather a fair way of raising taxes. The more luxury items you buy the more you pay.

  • Comment number 49.

    If you want a stable income, then this is wrong tax...put income tax at better levels...with more staggered increases, and lower VAT...and, as others have said, plug all the tax evasion loopholes. People will just not buy stuff if VAT puts it at an unreasonable level....

  • Comment number 50.

    The " poor" will be hit hardest ? Imagine, an extra 2 1/2 % on the price of a 40" tele (paid for out of their meagre benefits ), or the latest I phone they have to have to keep in touch with the benefits office. Those who spend most on luxury items will pay the most tax ; and who are they ?, why , the rich of course, not the poor. Who buys a Rolls Royce ?, not the average member of the benefit army to be sure. The effect on the " poor" is all in the twisted mind of the Labour party spin merchants who couldn't care less about "The poor ".

  • Comment number 51.


    An increase in VAT is not a good thing at a time of recession, and may have unforseen consequences to an unhealthy British economy.

    When Thatcher came to power Britain was unhealthy for other reasons, and reasons that had largely been caused by the outgoing Labour government trying to keep the unions happy with their unrealistic demands. But the Britain of then, with overmanning in industry an inept union leaders, isnot the Britain of today.

    Britain lost much of its heavy industry under the previous Tory government, and perhaps rightly so as it was uncompetetive. But today Britain, unlike Germany is in a much weaker position as a manufacturing country, with the focus on service jobs.

    The danger of the VAT rise may be that it makes a weak manufacturing base even weaker, leading perhaps to a state of almost terminal decline. But as with Thatcher, who's style of leadership I did not always agree with, you have a Tory government following an inept Labour government. And once again thanks to Labour leaving the Tories with the task of making difficult decisions. But this time I feel that the risk factor is much higher than under Thatcher. And it may well be a contributary factor to many in Britain finding it dificult, if not impossible in some cases, to ever be in gainful employment again.

    If Britain manages to get out of this mess, please, please let us never allow the Labour party anywhere near no 10 again, however they reinvent themselves.

  • Comment number 52.

    It'll help the "black" economy, certainly. We're going to see a lot more people offering to do work for cash-in-hand.

  • Comment number 53.

    18. At 09:56am on 04 Jan 2011, Ben wrote:
    10. At 09:45am on 04 Jan 2011, Magi Tatcher wrote

    What impact will the rise have on your personal finances?
    Very little. The rise in VAT will be offset by the increase in the standard personal allowance on income tax in April.

    ---------------------------------

    If this were actually true, then why bother increasing VAT?

    ==========================================

    If you tax people through PAYE they have no choice but to cough up. So they're all worse off. If you raise tax allowances and increase VAT they keep more of their earnings and then have a choice about what they spend their money on. If they buy zero VAT stuff (like food and kids clothes) they'll be better off. So it's a tax on (most) consumption rather than earnings. So it should help the less well-off.

  • Comment number 54.

    As per usual from this cabinette of multi millionaires, they don't have a clue as to how this will affect the average person. When the V.A.T. was cut the prices didn't go up, so why is it that now that the V.A.T. has gone up that the prices are going up? This rise is going to affect the poor much more than the rich. As has been said the weekly shopping is going to cost £17.50 per week. I think even the thickest of people will realise that for someone on £100 per week, £17.5 is going to affect them much more than someone on say £1000 per week or in other words for someone on £1000 per week this will be an increase of 1.75% of their income, for someone on £100 per week it is 17.5% of their income. How can that be fair? or even right?

  • Comment number 55.

    Just come back from the shops , no one about? no shoppers plenty of notices' in the windows {We pay the V.A,T increase or no V.A.T. increase here} The retail price index will tell the truth? This is only the start many more cuts and tax in the pipeline.

  • Comment number 56.

    VAT is a tax on everyone, a tax that is standard across the board and the same for all purchasers.

    This is argued to be an ideal tax as everyone pays ...remember 'we are all in this together'...however it is a tax that is disproportionally paid by the poor. For the wealthy (like the millionaires club in the cabinet)it will have virtually no effect but for the poor 2.5% can be a lot of money and it is not a tax that can be avoided.

    Can we also please stop saying that the economy was a result of Labours policies. It is a lie that the current government squeeze into every interview they give and they treat the public like fools. Labour weren't in power in all of the other countries in Europe, or the USA, or Canada, or Australia, Japan etc. It is the banks that messed up the whole of the worlds economies and it is the poor of the world that paid to stabilise the situation by bailing them out and it is the poor that will continue to pay to get us out of the mess.

    People should have been prosecuted and jailed for these crimes. Instead they get bonuses whilst politicians make merry and score points of each other and the public drowns in the misery of it.

    I cannot see a Happy New Year.

  • Comment number 57.

    Re post 32 : Cameron's much publicised opposition to the 'tax on jobs' i.e the NI increase, the reality is, the Employees NI increase in still going ahead. The Employers NI increase is not.
    As for post 10, the VAT rise and the NI rise coupled with Osborne's stealth cuts in Working Family Tax Credit and Child Care Allowances will more than offset the increase in Personal Tax allowance, once again we pay, they don't.
    What those on the right need to understand is, the majority of benefit claimants are in full-time employment. They qualify for benefits becasue their wage levels are so low. My principal objection to the structure of the benefits system is that tax-payers are subsidising employers who pay low wages.

  • Comment number 58.

    51. At 10:24am on 04 Jan 2011, monkeypuzzletree wrote:


    An increase in VAT is not a good thing at a time of recession, and may have unforseen consequences to an unhealthy British economy.


    We are not in recession.

  • Comment number 59.

    Just been watching the nauseating Alan Johnson on BBC news. What a hypocrite this man is along with Red Ed.
    Labour - no policies - 100 days of Red Ed with nothing to show apart from hypocrisy.

  • Comment number 60.

    'TAX EVASION IS LEGAL ...' Did I hear that right? Alan Johnson live on BBC. Goodness me! Tell me Mr Johnson, how do we go about evading paying tax? I'd love to know real quick! Go on, tell us.

  • Comment number 61.

    Of course the VAT increase will affect the economy...no one apart from the very well off will purchase items...hence they can have the smug thought of "helping with the Big Society". The normal man/woman knows that the VAT increase will affect them we certainly don't need any "experts" telling us what we already know. Maybe the ConDem's can charge themselves VAT on the donation of £100 to a charity everytime they utter or print the words "inherited from the previous Government".

  • Comment number 62.

    I just don't buy the argument that VAT is regressive as the poor pay more. I'm sure you can fudge the figures to make it look this way, but what are the facts...

    If I get a good education (and I don't mean private, I mean work hard and strive to achieve), have a strong work ethic, am diligent and professional at my job then I'll probably do ok and go on to earn a decent income. Why shouldn't I get a greater benefit from that than someone who perhaps hasn't been that bothered?

    My increased income means I can not only buy the basic necessities of life but also have the means to buy more things that are defined as luxuries, and which attract VAT. Surely, this means I am paying a greater proportion of VAT because I am buying more things that attract VAT?????

    By contrast, there is no VAT on many foods, childrens clothes, public transport, books and other everyday necessities of life.

    So I can only conclude that those who say the poorest will be hit hardest by the VAT are actually endorsing those with least means to continue to make bad personal choices by living beyond their means and buying 'luxuries'... but this is entirely personal choice.

    Its not for me to say what people should spend their money on but it does strike me that its a hollow argument. Perhaps if Labour are concerned about the VAT then they should be making an effort to steer people in the direction of goods that are exempt or zero rated for VAT....



  • Comment number 63.

    I can't help thinking that the Vat increase to 20% is more of a realignment with most other EU VAT rates !

    OK It Will raise extra revenue and ,therefore reduce the massive debt left by the last government OR go to protect some front line service/.

    What does surprise me is Labour's attitude'
    Labour are fantastic at making the problems ..
    Fantastic at Stirring up the problem

    BUT absolutely clueless in knuckling down and addressing the mess they left .
    The Labour party virtually made this country Bankrupt . They are now is "political administration"..
    Anything Labour says regarding the economy
    should be treated as a nonsense given their lack of ability to comprehend just what a absolute mess they left the country in

  • Comment number 64.

    57. At 10:27am on 04 Jan 2011, LeftieAgitator wrote:
    Re post 32 : Cameron's much publicised opposition to the 'tax on jobs' i.e the NI increase, the reality is, the Employees NI increase in still going ahead. The Employers NI increase is not.
    As for post 10, the VAT rise and the NI rise coupled with Osborne's stealth cuts in Working Family Tax Credit and Child Care Allowances will more than offset the increase in Personal Tax allowance, once again we pay, they don't.
    What those on the right need to understand is, the majority of benefit claimants are in full-time employment. They qualify for benefits becasue their wage levels are so low. My principal objection to the structure of the benefits system is that tax-payers are subsidising employers who pay low wages.

    --------------------------------------------

    Spot on! Especially that last sentence, which sums up how we've got into this mess. Beginning with the Thatcher government, but continuing under all governments since, the policy has been to screw down wages and to "compensate" for this (because we have to have enough money to buy things and keep the economy going) through state benefits and easy personal debt.

    The result has been, as you say, the state subsidising low wages and an ever-increasing bubble of personal debt that burst so spectacularly in 2007.

  • Comment number 65.

    "As for post 10, the VAT rise and the NI rise coupled with Osborne's stealth cuts in Working Family Tax Credit and Child Care Allowances will more than offset the increase in Personal Tax allowance, once again we pay, they don't."

    Come on Leftie, put a bit of flesh on the bones of that argument. How much will a family with one wage earner on £20,000 and two kids lose by these 'stealth cuts' in benefits?

    You say 'we pay, they don't' but it is workers who pay higher rates of tax who will get no benefit from the increase in personal allowances AND have the biggest cuts in benefits paid to them AND be paying the VAT increase as well.

    Again, with all parties agreeing that the shocking debt this country has needs to be tackled it is those on higher incomes who are suffering a disproportionate hit in all these areas.

  • Comment number 66.

    It's bound to have at least a slightly negative effect - We all have a finite amount of money and with no hope of a pay rise this year and the cost of transport, gas & electric, and council tax increasing combined with the VAT increase I'll be cutting down on non-essential spending, particularly the sort of things you pay VAT on.

  • Comment number 67.

    54. At 10:26am on 04 Jan 2011, Droschke wrote:
    As per usual from this cabinette of multi millionaires, they don't have a clue as to how this will affect the average person. When the V.A.T. was cut the prices didn't go up, so why is it that now that the V.A.T. has gone up that the prices are going up? This rise is going to affect the poor much more than the rich. As has been said the weekly shopping is going to cost £17.50 per week. I think even the thickest of people will realise that for someone on £100 per week, £17.5 is going to affect them much more than someone on say £1000 per week or in other words for someone on £1000 per week this will be an increase of 1.75% of their income, for someone on £100 per week it is 17.5% of their income. How can that be fair? or even right?

    ========================================

    Food is zero-rated for VAT. Even if it were not, to spend an extra £17.50 per week on food due to a 2.5% rise in VAT you'd need to be spending £700 a week on food. Big appetite!

  • Comment number 68.

    First thing that people seem quick to forget about is that wiping out the national debt puts the country in the position of having an extra sum substantially greater than the entire UK defence budget without additional taxes.

    With regard to VAT specifically, I'm not so sure that it's a bad idea. The biggest issue with the UK economy is that the portfolio has been far too biased towards consumer spending relative to manufacturing and export. In the short term, I would expect the higher than normal inflation to have a negative effect on the strength of the pound further encouraging the recultivation of manufacturing and exports, moving the country towards a healthier portfolio in contrast to our current dependence on the banking and retail, both of which only serve to create debt in the absence of real productivity.

  • Comment number 69.

    A 2.5% increase is extremely small and won't affect price unless you are spending on high value item like a house. Everyone needs to get used to the fact that the poor is always affected no matter how small the changes and so I don't see what the fuss is. Taxpayers complain those people without jobs don't contribute to the society, now the increase will force them to pay some more tax. The VAT is a good start but introducing a flat income tax will be even better to reduce the number of tax evaders.

  • Comment number 70.

    "61. At 10:33am on 04 Jan 2011, afreethinker wrote:
    Of course the VAT increase will affect the economy...no one apart from the very well off will purchase items..."

    Yes, I can see that. A £10 t-shirt now rockets in price to £10.21. Bound to put all but the wealthiest in the land from buying anything.

  • Comment number 71.

    The question is loaded. Increasing tax on goods is, at best, going to have a neutral effect on the economy assuming that demand is inelastic.

    When it comes to fiscal policy however the Government has to reduce the deficit. Labour has stated that if it were in power it would raise National Insurance contributions thereby increasing taxes for all of us who have to work for a living. Increasing Income Tax would be fairer but nobody is proposing that one as politicians on all sides know that it would go down like a lead balloon.

    The first 10 years of the century have just been one big party paid for by the country's credit card. Now it's pay back time. Do we clear the deficit as the coalition is proposing or leave our debts to be paid by our children and our children's children as proposed by Labour?

    We all know what happens when you default on your credit card so there's only one answer.

  • Comment number 72.

    This will do untold damage to the economy and consumer confidence. VAT hits everyone equally, rich or poor. We have wage freezes, job losses, welfare cuts, fuel rises, energy bill rises, food bill rises and an increase in NI for employees in April. This will only serve to supress consumer spending, with people deciding to service debts rather than spend. Inflation will rise which will hit morgage owners harder and so it goes. We are heading into a double dip recession. Bad decision driven by dogma and a government way out of its depth.

  • Comment number 73.

    ". At 09:38am on 04 Jan 2011, Ben wrote:
    No, they are not right to increase VAT. This is just the start of the Tory regime of putting up taxes repeatedly. If we rollover and take this, they will try their luck again and again!

    We paid off the banks before, and now we have to pay for the same thing again! Why not sell the shares in the banks we now own? The government should not be waiting for the share price to go up, if they are worth more than we bought them for, sell them! it doesn't matter who buys them, nothing is really owned by us anymore anyway.

    We are being squeezed to to point of bankrupting the very people who had to pay for this in the first place...us!!! George Osbourne and David Cameron are obsessed with clearing a debt in full asap to achieve what? will we get a tax break when the deficit is paid off? will VAT be lowered? of coarse not.

    What if retailers do get hit hard by this, we'll have more unemployed people needing to claim from the state, and be made to feel like scroungers for doing so! People are going to have to start borrowing more to maintain their life styles, and we all know where that will lead.

    But of coarse, people could change their lifestyles, which is possibly what the Tories want. If you're poor, it's your fault and you should suffer. If you're rich, you must of earned it and should therefore be rewarded for it. It's the 1980's all over again, except this time, we don't have anything left in the public sector to sell off, or do we, the NHS perhaps?"

    ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

    points reasonably well made - and my question to you and Mr Milliband is "What would you do"?

    Taxes up, spending down. Doing nothing is not an option!

  • Comment number 74.

    60. At 10:31am on 04 Jan 2011, Susan wrote:

    'TAX EVASION IS LEGAL ...' Did I hear that right? Alan Johnson live on BBC. Goodness me! Tell me Mr Johnson, how do we go about evading paying tax? I'd love to know real quick! Go on, tell us.

    --------------------------------------------

    Thats the thing Susan, people on PAYE don`t have the luxury of being able to avoid tax. One rule for the rich etc etc.....

  • Comment number 75.

    67. At 10:38am on 04 Jan 2011, ClaudeBalls wrote:
    ========================================

    Food is zero-rated for VAT. Even if it were not, to spend an extra £17.50 per week on food due to a 2.5% rise in VAT you'd need to be spending £700 a week on food. Big appetite!


    Aha rumbled! John Prescott has revealed himself...

  • Comment number 76.

    VAT increased to 20% brings us in line with many European countries. I live in Germany but here the economy is good bit...the Germans I work with say they do not like the level of VAT either. So we have things in common with other nations. We dislike Government VAT levels and see it as a second tax on an already taxed income.

    The 2.5% rise quotes of 200 now being 205 are wrong because the 200 was based on 17.5% VAT to get to 200. Now you will have the added VAT on the delivery, purchase, packaging etc of the item to be purchased. Your 200 will be 215 quite quickly and surprise surprise you did not think about the chain of events before it got to you.

    The 20% is not on the price you know now it is on the whole process the item travels through to get to you. Multi layered tax system that goes into the Government.

    The new level will affect sales, wel it will mine as it makes me think about whether it is worth buying now or should I wait. I will wait until I save a bit more and the objects I wish to replace really become defunct.

    Yes the 2.5% rise will be affect the richer buyers as they will pay more and this is the only tax that is actually relevent in this way.
    More expensive items or luxuries should cost more. Essentials for living, efood, heating, water etc should be VAT free and treated as some are now.

    Do not forget the infrastructure that brought the new purchase to the shop, they are going up too, just look at fuel, where is that going to be absorbed?? It isn't it will be added to the 200 pounds quoted earlier and then your level of VAT will be added.

    You are all being robbed again.

  • Comment number 77.

    VAT up by 2.5% - so what?

    I've got £100 in my pocket to spend and I'll spend it. Yesterday £17.50 would have gone to the Government, today its £20.00.

    Still spent £100.00, Goverment gets a bit more.

    May have had to compromise on what I bought or bartered a bit.

    I'd rather have our National Debt under control.

  • Comment number 78.

    What the media seems to have missed is that fuel duty is also rising, for which VAT is paid on top. The VAT increase itself will have little impact on day-to-day purchases, as it amounts to £25 in £1000. But this stupid government has also decided to go ahead with fuel duty increases, which affects the cost of being able to travel - most people need a car, bus or a train to get to work. Busses, cars and trains (where I live they are all diesel trains) all require fuel - for which Cameron & Co have just hiked tax on top of the VAT increase. I wonder if the knock on effect will be an increase in the illegal use of red (aka agricultural) diesel - especially amongst small hauliers, builders, etc?

  • Comment number 79.

    "For Labour, shadow chancellor Alan Johnson said: "This is a broken promise - this was the big issue of the general election campaign."

    Could Mr Johnson (or anyone else for that matter) point to any statement from the Conservatives before the election saying that they would NOT put up VAT? Can anyone point to a statement from any Labour source before the election promising that they would NOT put up VAT?

    No such promises were made by either party because both knew it was very likely they'd have to increase VAT owing to the appalling state the UK finances were in. Remember, NIC was already going up, a higher tax rate had already been put in place. There was no other choice except even larger cuts in spending.

    What Johnson and the Labour party are now spouting is just more odious dishonesty.

  • Comment number 80.

    It should never have been reduced to 15%, for the good that it did. People still lost their jobs and homes and companies still struggled.
    The reduction barely took anything off. A 2.5% rise will barely be noticed within every day life. Milliband says it weill hit the poorest hardest. It will hit everyone who buys anything they don't need or can't afford.
    We need to stop importing so much and make use of our own skills more.
    Once upon a time we were a fairly self-sufficient country. They might call it protectionism, I call it keeping our own economy going.
    Very little was helped in the bad times. The car industry might employ a lot of people, but do we really need it?

  • Comment number 81.

    i think we need to change the goverment in office now bring back labour.VAT should be changed to 10% and frozed its all greed and all the poor will suffer with high costs and will lead to people losing jobs homes and there lives. i understand we in debt but find better way doing things instead hittin the poor all the time .and scrap TV License also what a lot greedy people we have in this world .

  • Comment number 82.

    Of course the Government will "massage" the figures to show that it is helping the economy - but in real terms it will be harmful.

    Wages are not going up to meet the extra costs that us mere mortals have to meet - ergo we'll have to spread our money further and the outcome is we will spend less.

    Businesses already struggling with falling revenues will fail, increasing unemployment and placing more people on the burden of the welfare state (ergo Government will now be spending more of the money it raises in tax on those out of work).

    This is a vicious circle and demonstrates a Government that lacks the creativity to stay in power for very long at all (I hope!).

  • Comment number 83.

    24. At 10:02am on 04 Jan 2011, LeftieAgitator wrote:
    This coalition of the right has decided, for idealogical reasons to cut the size of the deficit in 4 years, rather than over a longer period.
    --
    After all, why do today what you can put off until tomorrow? We can spend today and expect our children to pick up the bill can't we? The UK's 2010 budget deficit is 13.5% GDP. Compare that with Greece (9.5%), USA (9%), France (7.8%) and Germany (3.7%). As Brown was fond of telling us, this was a global financial crisis, so why are we running by far the highest budget deficit? THIS is what makes it so urgent to get things under control. If you think that not spending so much more than you are earning is some kind of crazy ideology then I seriously hope you don't have access to a credit card.
    --
    It is idealogical as they have announced no measures to recover the £25 billion a year lost to HMRC through tax evasion and tax avoidance or recover the £100 billion in unpaid back tax either. In fact Osborne wrote off Vodaphone's £6 billion in unpaid tax.
    --
    Another convenient distortion of the facts there LA. Firstly the disputed amount of Vodafone's tax bill was significantly less than £6bn (more usually reckoned to be £2-2.5bn). Vodafone had already paid tax in one EU country and the UK wanted to apply a higher rate. It was a dispute over EU tax law, and since the last Labour government had argued against any tax harmonisation amongst EU countries then they can't blame a corporation for taking advantage of a lower corporate tax regime elsewhere in the EU for a merger between two EU companies. Osborne DIDN'T "write off £6 billion in unpaid tax" but HMRC decided after Vodafone won their case only for HMRC to win on appeal and Vodafone to appeal that, that they agreed a settlement of £1.9bn.
    --
    VAT is a regressive tax as those on lower incomes pay more in real terms than the better off.
    --
    Which is why they are raising the personal allowance for income tax, which disproportionately favours those on lower incomes!
    --
    They are using the deficit as the excuse for their small state agenda, the Lib-Dems are taking the flak and the 'NuLabor mismanagement' mantra provides the reason.
    The reality is, the ending of public sector provision and it's replacement by the private sector was laid out in the Tories position papers published in 2008. They were going to do this no matter what state the economy was in. Paradoxically, the credit crunch enables them to cut deeper and faster than the could have otherwise.
    --
    Nu-Labour mismanagement of the economy isn't a mantra, it's reality and thank goodness somebody is having the guts to clean up the mess. The public sector is a very important and necessary part of our economy, and I greatly value many of the people working in it. HOWEVER, its wealth-creating ability is limited and indirect, and is largely paid for by the wealth-creating private sector. Under Labour the public sector ballooned like never before and it became more expensive than ever before. It needs to be reduced to a point where it is affordable and most efficient. This is just good economics and if Labour don't get it then that goes a long way to explaining why they can't be trusted with the economy.

  • Comment number 84.

    I'm not sure people will notice it on everyday stuff once the hoo ha has died down. I can see lots more expensive jobs been done for cash. I can also see companies adding there 'bit' to the extra vat. So I guess that will cause extra inflation.

  • Comment number 85.

    "74. At 10:43am on 04 Jan 2011, corncobuk wrote:
    60. At 10:31am on 04 Jan 2011, Susan wrote:

    'TAX EVASION IS LEGAL ...' Did I hear that right? Alan Johnson live on BBC. Goodness me! Tell me Mr Johnson, how do we go about evading paying tax? I'd love to know real quick! Go on, tell us.

    --------------------------------------------

    Thats the thing Susan, people on PAYE don`t have the luxury of being able to avoid tax. One rule for the rich etc etc....."

    Susan appears to be highlighting Johnson's apparent lack of understanding of his supposed subject if he confuses evasion (illegal) with avoiding (legal).

    Besides, of course you can avoid tax if you're an employee on PAYE. Save into a pension, save in an ISA, participate in employer share schemes, childcare vouchers, cycle to work schemes, have your employer pay for parking etc etc.

    Besides, you think there are no rich employees on PAYE?

  • Comment number 86.

    73. At 10:42am on 04 Jan 2011, Clive Hamilton wrote:
    ". At 09:38am on 04 Jan 2011, Ben wrote:
    No, they are not right to increase VAT. This is just the start of the Tory regime of putting up taxes repeatedly. If we rollover and take this, they will try their luck again and again!

    -------------

    Labour put taxes up dozens if not hundreds of times.
    At least VAT it is a tax we can choose to pay, because we don't have to buy things. It's not on food (although the supermarkets will put the prices up).
    They need to scrap the petrol fuel duty rise. That might be adding to the coffers but it is very unfair when they get more when the price of oil goes up.

  • Comment number 87.

    This is a prime example of "rearranging the deckchairs on the Titanic".

    It will make no difference one way or the other! What we should be concerned about is what this government is trying to divert our attention away from by implementing this greatly-hyped side-issue.

  • Comment number 88.

    The VAT increase is not a huge amount, and I doubt I'll be affected too badly.

    However, its a quick fix to a problem which will more than likely be repeated. Paying off the debt is one thing - staying debt free is another, and I have seen or heard no Tory strategy to do this. They should be looking at the prevention in future, way before the cure right now.

  • Comment number 89.

    At 10:06am on 04 Jan 2011, Ben wrote:

    I did not mention anything about the Threshold. But lets look at this. If you earn say £500,000, why should that be taxed at 50% above £150,000? Why should that person pay HALF his income as tax.

    As always, this penilises success. Our tax system is regressive, not progressive. The more you earn the more you should keep, this promotes reward for success.

    Unfortunately this country has too many people who expect something for nothing.

    Also re benefits, if people have worked and paid in the system for years and through no fault of their own lose their job, they should be looked after, and i dont mean £65 pwk. Who can live on that? And i dont mean the disabled or the pensioners either.

    We have THOUSANDS in this country who receive more in benefits than they could ever earn all because they have been feckless and had children. That is the inequality of the benefits system, and this is why we are in such a mess because labour gave out far too much to those who simply dont deserve it, that is FACT.

  • Comment number 90.

    41. At 10:16am on 04 Jan 2011, Megan wrote:

    The only way this increase can be acceptable is if the £13bn the administration claim it will raise will be ring-fenced and used towards meeting their duty towards the citizens of this nation and not spent on anything else whatsoever.

    The obligations incurred by asking for more money must be met. No longer can our money be wasted to the profit of the mediocre, the greedy, the self-serving, the dishonest and corrupt. If the administration wants ANY money from the citizens it is paid to serve, they must prove that it will be used to their benefit, in the provision of the services for which it is given.

    ----------------------------------------------
    This is the point Megan, what will clearing the budget actually mean for us? A tax break, not likely! Better quality roads public services? they have been progressively getting worse for decades.

    ////////////////////////////////////
    15. At 09:51am on 04 Jan 2011, tobycoulson wrote:

    6. At 09:38am on 04 Jan 2011, Ben wrote:

    No, they are not right to increase VAT. This is just the start of the Tory regime of putting up taxes repeatedly. If we rollover and take this, they will try their luck again and again!
    ------------------------------------------------
    I think you'll find that raising taxes goes against Tory policy. They have in the past been very anti tax rises whereas raising taxes is a Labour indulgence, so to say that it is a Tory regime to repeatedly increase tax is somewhat wide of the mark. They are having to increase tax to pay off the mess Labour left us with even with their record tax revenues of the past 13 years.

    ------

    Tobi,
    What the Tories did in 80's and 90's was far worse than any tax increase (even worse than the poll tax attempt, which failed!!). They sold our publically owned services to stop us going into a huge deficit. They sold our gas and electricity services to the private sector, and now we are at their mercy and have no choice but to pay whatever price increases they make, which is subject to VAT (or we can freeze to death!!), they sold our public transport and we now have to pay whatever increases they want to make, if not, we can't go to work (Even though we still have to give the train company and its shareholders goovernment money)!!!
    If they had been kept them under our ownership and had the increases in prices we see now, all the profit would have gone into the treasury and paid off any deficit quicker!!!Instead the money goes in someone elses pocket and the treasury only get the corporation tax against the companies profits.
    The Tories started this mess with Thatcher and covered it up by selling our services for some quick cash, they are fakes and should be thrown out of government. Irrespective of this, the 'new labour' is a dressed up Tory government, a real labour government would never have allowed the banks to get away with their behaviour. Nor would they have sold England (our country, remember?) to the highest bidder!
    This tax allowance increase is also a cop out. Everyone benefits from this increase. The higher rate tax payers only pay the higher rate on their earnings over the threshold, anything below this is treated the same as everyone else's. So how will they not benefit from the allowance change as well?

  • Comment number 91.

    Did anyone else hear Alan Johnson declare on BBC news this morning that tax evasion is legal, and he wasn't picked up on it??

    No wonder we're in a mess.

  • Comment number 92.

    Quote:This will do untold damage to the economy and consumer confidence. VAT hits everyone equally, rich or poor. We have wage freezes, job losses, welfare cuts, fuel rises, energy bill rises, food bill rises and an increase in NI for employees in April. This will only serve to supress consumer spending, with people deciding to service debts rather than spend.

    Absolutely correct. Now that fuel costs of all types and VAT have become unacceptable to most people, quite simply now, we as a family will NOT be going out spending any money on anything except essentials. It's quite simple.

    We will not be bullied into this situation by ANY government. THEY caused this shambles with their banker cronies. Let THEM pay their money to sort it out again. No Sunday lunches out, no more cinema, trips to the countryside, and a holiday here at home. We will sell our second car, saving on fuel, tax, insurance and road Tax, and we will just not spend any money except on essentials. How THAT will help the economy is quite beyond me.

    Amazing that, in a time of incredible hardship, caused by the above, WE, as the general Public, are still expected to pick up the tab.

    It's going to completely screw the economy, and I'm 100% certain that we WILL go back into recession as a result.

    Just when people were expecting a harder life, this comes along to hit everybody.

  • Comment number 93.

    Let me see.
    Current inflation rate is just over 3%.
    VAT increase of 2.5%, so that effectively doubles the likely price hikes on most things.

    Balanced against that is the generous 0% pay rise many of us are seeing, and indeed added to this the 0% 'cost of living' increase on top of this.

    Track this back a couple of years, and many of us are seeing an unchanged pay packet being stretched across 15% more household expenses.....

    And Osbourne has the cheek to nip off for a holiday in Klosters! Many of us simply cannot afford holidays. Anywhere. At all!

  • Comment number 94.

    I disgree with the obsession of clearing the debt as an immediate and absolute priority, but the Coalition clearly do, and the mathematics of the House of Commons support this approach. What annoys me, is that the Tories have for years wanted to focus our tax collection on Indirect Taxation (VAT) rather than Direct Taxation (Income Tax). This approach clearly benefits the well off. This VAT increase is a long term plan, and not a short term debt clearance measure. When the debt is cleared, we can be assured that it will be income tax reductions and not a reversal of the 20% VAT that will be the priority.
    Personally, I believe that we should tackle the debt through Income Tax, so that those fortunate enough to have kept their jobs, should pay.

  • Comment number 95.

    "87. At 10:56am on 04 Jan 2011, HSWET wrote:
    This is a prime example of "rearranging the deckchairs on the Titanic".

    It will make no difference one way or the other! What we should be concerned about is what this government is trying to divert our attention away from by implementing this greatly-hyped side-issue."

    Go on then, give us all a laugh. What is it that this government is trying to divert our attention away from?

  • Comment number 96.

    5. At 09:37am on 04 Jan 2011, john33 wrote:

    It will certainly help to reduce the budget deficit.

    When we are talking about an increase in cost of goods of £25 per £1000, I have to say that I think all the talk about how hard people will be hit by this rise is a lot of hyped up nonsense.

    I am one of the 'poor' that this is supposed to hit the hardest and I really see it having very little effect on me.

    It really does the Labour Party no credit to bitch about this when it is largely their profligate spending that put us here in the first place.


    I couldn't agree more, an extra 2.5% will go practically unnoticed. Time for all the whingeing left wing moaners, whose inept government put us in this position in the first place, to stop moaning, suck it up and get on with it.

  • Comment number 97.

    It all depends on consumer expectations and confidence. Those who suffer as the result of paying another 2.5% will have been suffering under the 17.5% regime. The key issue is how will middle England respond as it has the most impact on both consumer expenditure and government revenue. If they feel relatively secure and that the economic future is OK then the additional 2.5% may have little impact. The real problem will be the collective health of Eurozone - our major trading partner. If that goes sour we have a far more serious problem to live with as the output and employment consequences will be dire.

  • Comment number 98.

    36. At 10:14am on 04 Jan 2011, Andrew Morton wrote:
    5. At 09:37am on 04 Jan 2011, john33 wrote:
    It will certainly help to reduce the budget deficit.

    When we are talking about an increase in cost of goods of £25 per £1000, I have to say that I think all the talk about how hard people will be hit by this rise is a lot of hyped up nonsense.

    I am one of the 'poor' that this is supposed to hit the hardest and I really see it having very little effect on me.

    It really does the Labour Party no credit to bitch about this when it is largely their profligate spending that put us here in the first place.

    ---------------------------------------------------

    And here are the actual facts. National debt, as a proportion of GDP, FELL consistently year-on-year between 1997 and 2004 -that's more than half the time Labour were in office. Between 2004 and 2007 it rose, but was still well BELOW the level they inherited in 1997 - hard to see where the charge of "profligacy" can be applied.
    Public debt skyrocketed in 2007. What happened then? Oh yes! - the banks went belly-up and needed vast amounts of public cash to bail them out. THAT is what put us here in the first place.

    And how are the bankers doing now?

    -----------------------------------------------------------

    Hmmm... as I understand it, it isn't out national debt that's the problem as such, but rather the rate that we are adding to it (ie our budget defecit). I believe this is the largest of any G20 nation, and if left unchecked would destroy our economy.

  • Comment number 99.

    "88. At 10:56am on 04 Jan 2011, Anaiya wrote:
    The VAT increase is not a huge amount, and I doubt I'll be affected too badly.

    However, its a quick fix to a problem which will more than likely be repeated. Paying off the debt is one thing - staying debt free is another, and I have seen or heard no Tory strategy to do this. They should be looking at the prevention in future, way before the cure right now."

    Give them a chance, they've only been in office for 7 months.

    I expect their strategy will be based on the crazy notion of NOT spending £40bn a year, every year, more than they take in taxes. OK, that's something Labour might struggle to get their heads round but I think it's the way to go.

  • Comment number 100.

    It will do no good to raise Vat and I for one will check for the items that Carry VAT and i will not puchase any such items I cannot affolrd this increase Regards Barrie Mayes

 

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