The VAT rise may cause some people to decrease their spending
|
As of January 4 the standard rate of VAT has risen from 17.5 per cent to 20 per cent in hope of cutting the government’s deficit
The government have commented saying that the rise is necessary to help bring down the UK’s high budget deficit.
George Osborne, chancellor, has backed the move saying that it is more ‘progressive’ to increase VAT than to increase income tax or National Insurance.
Business groups have warned that retailers will be most likely to be hit by the increase.
The British Retail Consortium (BRC) estimated that retail sales would drop by £2.2bn during the first three months of 2011 as a result of the VAT increase.
However, others think that the VAT rise will not have a lasting impact as shoppers will soon return to their old spending habits.
The price of food, children’s clothing, newspapers and magazines will be exempt from the VAT increase.
By Lauren King
| 
Win a limited edition bike worth £399.99!
