Budget 2010: VAT

George Osborne

Chancellor George Osborne has unveiled his emergency budget, and as suspected VAT has seen a rise.

In a bid to reduce Britain’s huge debt, Chancellor Osborne has detailed the key measures that he hopes will help Britain claw its way back out of the financial doldrums within the next five years. Unfortunately this means austerity measures and one of the main points of interest is the rise in VAT, going up to 20 percent from 17.5 percent.

When the VAT increase was announced it led to cries of dismay in the House of Commons, however Chancellor Osborne said “The years of debt and spending make this unavoidable”.

It's thought that the VAT increase will help raise an extra £13.4 billion per year, something that Mr Osborne highlighted would have to come from somewhere else if not VAT- “That is £13 billion we don’t have to find from extra spending cuts or income tax rises” he said.

However the increase will not come into effect until January 2011, giving consumers and retailers alike the chance to ready themselves. The increase will raise the price of hundreds of day-to-day items and experts have calculated that it could cost households £517 extra per year.

Despite a volley of criticism some people feel that the VAT increase may not be as harsh as suspected: “This tax could raise an extra £13 billion in a year and it is not as socially debilitating as Labour would have us believe. After all, the wealthier will spend the most and buy the most goods” said David Buick of BCG Partners.