The VAT con on its way!
Only a couple of months after Mr Darling’s wonderfully generous reduction in VAT (see post on 15th Dec), the talk of how the lost revenue will be recouped has begun. As I pointed out in December, the reduction did not reduce prices by 2.5%, even when fully passed on to consumers. A little simple arithmatic shows the true price reduction was only just over 2.1%. Furthermore, this only applied to items that were charged at 17.5% and so excluded the products and services that consume the vast majority of low income households’ money. Most staple foods, children’s clothes and utility bills did not experience a reduction in VAT, so no saving was made by those households with little spare cash to spend.
I have heard that, in the Spring of 2010, the VAT rate will rise to 18.5% and could applied to all items, including all food stuffs and children’s clothes. This would result in an increase of almost one fifth in the food bill and cost of clothing our children. If domestic fuel is also subjected to the new rate, the cost to the consumer will jump more than 10%. Even if these currently VAT exempt or low rated items are not charged at the full 18.5% , the net result will be the poorest households, who gained the least, being forced to pay back the VAT savings made by those with more disposable income. Any increase in the VAT on domestic fuel will also push more families into fuel poverty.
Mr Brown did a pretty good job of shooting himself in the foot over the 10% income tax rate removal last year. He was forced to apologise and, with the assistance of his puppet Mr Darling, draw up a hasty restructuring of income tax thresholds to ensure that only a few poor households were made worse off. If the plan really is to put VAT on those items currently not taxed, it would seem that there is, in fact, a deliberate policy to heap the taxation burden onto the poorest families. To even consider bringing about an increase in fuel bills, given the Government’s frequently stated ambition to reduce the number of households struggling to keep warm, displays an unimaginable lack of coordinated planning and a calous disregard for some of the poorest members of society.
