VAT rise ‘should not cripple consumer confidence’

The headlines from yesterday’s newspapers all focused on the 20 per cent VAT increase in the Budget, but one expert believes it should not have too much of an impact on consumer confidence.

People looking for consumer advice should not be too worried, according to Andrew Hagger, spokesperson at Moneynet, who said that smaller items will not be too badly affected by the rise, with the pain only being felt on “larger ticket items”.

“If you are someone who is affected by housing benefit and child tax credits as well as the VAT, then yes it will possibly have an impact. But an extra 2.5 per cent on smaller items is probably not going to count so much,” he said.

The expert predicted that companies could introduce special offers which negate the VAT increase and therefore stimulate competition.

By the end of this parliament the VAT increase should generate over £13 billion a year of extra revenues, according to the treasury.

Posted by Alice Rowe