Dangers Of A 20% VAT Rate

The research found that:

  • A 20% VAT rate would:
    • Reduce the deficit by £11.3 Billion in year one but would result in 30,000 fewer jobs by the end of that year
    • Reduce consumer spending by:
      • £1.6 Billion in year two, AND
      • £3.6 Billion over four years
    • Result in 163,000 less jobs after four years
  • A 19% VAT rate would cost 99,000 jobs over four years
  • A 22.5% VAT rate would cost 317,000  jobs over four years
  • The proposed 1% increase in Employees National Insurance Contributions and 0.5% increase in Employers NI will:
    • Reduce UK job numbers by 25,000 in the year one
    • Reduced UK job numbers by 109,000 after four years
    • Reduce consumer spending by:
      • £948 million in year one
      • £2.2 billion after four years

The BRC has called for the new Conservative / Liberal Democrat Coalition Government to reduce public spending rather than target tax increases, as mentioned in the run up to the General Election. The Queens speech included details of significant reductions in public spending with a number of high profile projects (including the National Identity Care Scheme and the next generation of Biometric Passports) being cancelled.

The Director General of the British Retail Consortium, Stephen Robertson, said that “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 budget deficit is serious. It has to be tackled but proposals must be judged against the implications for jobs and growth revealed by this new information. The main tool has to be cutting non-vital public spending. Removing some of the previously-planned National Insurance increase and signals that the Chancellor will look for an 80:20 split between public spending cuts and tax rises are a welcome start. Business growth will get the country out of the hole it\’s in, led by retail. The Government must now deliver a route to stability that supports companies and customers by avoiding damaging tax rises.\”

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