Alistair Darling says VAT must go up
Alistair Darling, the Chancellor, is insisting that VAT must go up at the end of the year creating a rift in the Cabinet.
The Chancellor said:
"The reason that I cut VAT was to bring forward spending during this year as part of the process of helping our economy get through it.
But you know when you consider that it costs almost about a billion pounds a month, I was quite clear at the budget and clear when I announced this last November that the VAT rate would return to the 17.5 per cent at the end of this year."
His comments come just days after Harriet Harman said the planned rise from 15 per cent to 17.5 per cent on January 1 was "under review".
Ms Harman, said the Government would be flexible about VAT – a move that was welcomed by business groups.
Leading figures in the retail and hospitality industry, including Sir Philip Green and Sir Stuart Rose, have argued it will be an "administrative nightmare" to implement the change not only on a Bank Holiday, but also at the busiest time of the year for restaurants, hotels and shops.
Business leaders and economists argue that the Treasury can afford to postpone the planned increase by a month because VAT revenue has fallen by £800 million less than expected – the equivalent to a month's tax take.
Bob Cotton, the chief executive of the British Hospitality Association, said: "It is the worst day in the whole year for restaurants and hotels. Even January 2 would be better.
"Trade is so delicately balanced at the moment that putting up VAT can only do harm. The lower rate is keeping many people in work and paying tax. Any economic confidence that is around at the moment is so fragile; putting up the tax could kill off the recovery."
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This Latest News article was created on 26th July 2009
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