Retailers hit with VAT hike to 20 percent in 2011

Chancellor George Osborne Delivers Emergency Budget

The British Retail Consortium has given a guarded welcome to Tuesday’s emergency budget, but stuck to its previous assertion that the rise in VAT to 20 percent will hit retailers hard.

BRC director general Stephen Robertson restated that he did not want the VAT increase. “It will hit jobs, consumer spending, the pace of recovery and add to inflation but we accept the government has no easy options,” he added.

Robertson welcomed news that the range of goods that incur VAT has not been extended, which will avoid costly reconfiguration of pricing across product lines. He also suggested that the six month notice before the VAT change in January next year would make it easier for his members to prepare.

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“The start date, in the middle of the busy and crucial post-Christmas sales period, will be difficult but retailers would rather have more notice than less. Six months to prepare is better than the rise coming-in this summer,” he said.

The coalition government resisted dramatic tax rises beyond the VAT hike and focused more on reducing the size of the welfare state and public sector over the course of this parliament.

The BRC says this approach is fair and necessary. “The Government is right to prioritise substantial cuts in public spending over tax rises. It has to cut spending which cannot be fully justified and get more from every pound it raises.

“The Chancellor is right that private sector businesses are the engine that will drive growth. To restore the public finances to health the Government must deliver an environment that encourages private sector investment. Tax increases do the opposite,” said Robertson.

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