Jobless warning over VAT rise
By Rebecca Burns
VAT hikes would cost 163,000 jobs and £3.6billion of consumer spending, according to the British Retail Consortium (BRC).
A new VAT rate of 20%, up from 17.5 per cent, would reduce the deficit by £11.3 billion after one year, the BRC said.
But higher prices would also affect consumer spending and job availability, with a loss of 30,000 posts in the first year alone.
British Retail Consortium director general Stephen Robertson said: “For the first time we have clear, independent evidence showing VAT and NI increases will have a deep and long-lasting impact on jobs and growth.
“The government must now deliver a route to stability that supports companies and customers by avoiding damaging tax rises.”
The BRC said the government cannot put its hopes on a “silver bullet” solution to the deficit.
A VAT rise, it warned, would hit the most vulnerable in society, lower consumer demand, decrease productivity and increase unemployment.
The BRC has instead recommended a consumer-led revival and a cut in all non-essential public spending.
It approved, however, of measures such as the removal of the planned National Insurance increases.
All three political parties refused to rule out VAT rises during the general election campaign and economic analysts expect it to form a part of the deficit reduction plan.
