VAT to rise to 18.5%?

[Das Root]

Possibly, according to a document from "OPSI" it's going up in 2011....or is it? Supposedly just an "error" as it's not going to happen....or just an error in the fact it's been wrongly released?

 

They're going to have to get the cash to repay massive public borrowing from somewhere and a 0.5% in NI and 5% on the top tax band sure as heck ain't going to do it.

[hughesie27]

Much like the 2.5 decrease, a 1% increase will make no difference.

[Victorian]

1% above the current rate.

 

not exactly a new winter of discontent.

 

i'm sure the tories will scream the house down about it though.

[Das Root]

Much like the 2.5 decrease, a 1% increase will make no difference.

 

 

The decrease / increase will mean little difference to businesses, as VAT is irrelevant apart from having to pay the VAT on profits each quarter.

 

The decrease may have little difference on consumers, if businesses do not choose to pass it on and instead just use it to boost profits.

 

But a 1% increase will make a difference (however slight), as it will be passed on. Sure, not on a daily basis or even per purchase but annually it will mean a rise for every household and individual in living costs.

 

And for the government, it will be a cash bonanza.

[Geoff Kilpatrick]

I think things will be a lot worse than that. The thing is, Brown has been blethering on about the need for a "fiscal stimulus" across the world, the reason being (although unsaid) is that the world could be heading for another depression otherwise.

 

Unfortunately for the UK, this means every government across the developed world will be selling government securities at the same time in a bid to reflate their economies, with the main buyers being Middle East sovereign funds. Now, if you manage one of these funds, why would you buy UK securities over US ones (as the reserve currency), or Euro securities without higher interest rates?

 

There will be a further devaluation of sterling which will lead to higher import prices and the price of some goods becoming unaffordable for people (suddenly that flat-screen TV they've been wittering about after the VAT cut becomes a lot more expensive) and the return of inflationary pressures.

 

This will be coupled with an inevitable reduction in the size of the public sector because, as it stands, it is unaffordable.

 

So, this "leak" should be seen in context. Taxes will rise significantly in the UK over the next few years, no matter who is in power.