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VAT increase hits the poor already as retailers raise prices early

A new report from tax consultants KPMG shows that retailers are already cashing in on the forthcoming rise in VAT. They have already increased prices by up to 10% and 60% of retailers questioned anonymously say they intend to add a further increase in January and blame it on the 2.5% increase in VAT.

Retail associations have tried to talk down the report but if you want proof of the increase, just walk around your local shopping centre or supermarket. Today, the Consumer Price Index shows that inflation is going up and up and is likely to continue to do so.

Although the Government claims that the poor will not be hit hardest by the tax increase, the figures do not support their claim. Official figures show that the lowest 10% of UK citizens, those unable to work and those on Job Seekers Allowance pay 14% of their already low income in VAT whilst the wealthiest 5% pay only 5%.

The Chancellor, George Osborne has consistently tried to sell the idea that the rich will pay more than the poor after the VAT hike. Whilst this may be true in cash terms, it is certainly not true in terms of the proportion of income paid. To put it another way, if you are on only £64 a week and have to pay an extra £7 a week in VAT, it will make a much bigger difference than if you were paying an extra £50 a week out of a £1000 per week salary.

Osborne, Clegg and Cameron won’t notice any difference of course and neither will most of the Cabinet. 18 of the 22 members of the Cabinet are millionaires.

Retailers have had to keep prices low throughout 2010 because people are spending much less. By raising prices now they get an extra windfall; firstly because Christmas is when people spend most money and secondly because they can then raise prices again on 4th January and blame it on the rise in VAT.

The Prime Minister, the weak David Cameron and his subservient Deputy, Nick Clegg both say that what most regard as essentials, food, children’s clothes etc, will not be affected. TheOpinionSite.org believes that such dishonesty is becoming a trademark of the Coalition. The truth is that if VAT goes up, so does everything else. It causes higher costs for energy, more for fuel, more for packaging etc, all of which is then passed on in full to the customer – you and me. Food and other essentials have already increased in price and will continue to do so even more after January 4th

So what will the Government do to help those who are amongst the poorest in his shiny, new, ‘Big Society’?

Not much actually.

Governments love VAT. Everyone has to pay it, the Government makes a fortune from it and it keeps the wealthy happy because many of them avoid it through ‘business expenses’ which allow them to reclaim VAT anyway. There is also no need to increase Income Tax which is politically preferable to a Conservative administration that is only interested in the wealthy.

Let us be honest and not pretend that we are dealing with anything other than a Conservative policy here. The Liberal Democrats have been told to shut up and not cause trouble, the same way as they have been told to keep quiet in so many other areas of policy making.

VAT is great for Governments. Petrol, alcohol and tobacco all have Duty added and VAT is paid on the Duty as well as the price of the goods themselves. Given that Cameron has already announced he intends to hugely increase the cost of alcohol and tobacco and that fuel is at its highest price for years, the Government are going to rake it in.

The poor have few luxuries other than a cigarette and the odd pint so they will feel all of this much more than the wealthy or the ‘middle classes’, a term that nowadays seems to cover everyone except the destitute. They will also have to pay a great deal more for food, bus fares and heating and, thanks to cuts in benefits, will have a great deal less money with which to do so.

Remember too that nobody is poor by choice. It could happen to you next year.

The Government claims that the increase in VAT is necessary in order to pay off the debt produced by the financial crisis of the last 2 years.

TheOpinionSite.org believes that it is truly hypocritical that those who caused that financial crisis – the bankers and their wealthy shareholders – will end up paying a much smaller proportion of their income  to sort out their mess than anyone else.

It is nearly always true that the rich will get richer. However, a responsible and caring Government would not allow the poor to become even worse off; nor would they allow greedy retailers to rip off the public by putting up prices now and then doing so again in January under the cover of a VAT increase.

Quite clearly, Cameron and Clegg are both irresponsible and uncaring but then again, as they are both millionaires and interested only in themselves, why would they be anything else?

3 Responses to VAT increase hits the poor already as retailers raise prices early

  1. Nick
    January 4, 2011 at 12:52 am

    It’s dreadful and of course it will hit the people on the lowest incomes more (us). Why should it be us that pays for the huge debt caused by a problem that begun in the US and only effected the UK because of the greedy Banks who gamble with our money to get richer. It wasn’t the Prime Minister of the day but a time bomb waiting to happen.

    Many of the Banks that borrowed taxpayers money have reported huge profits. They are quick enough to claw back every single penny that the humble working man owes. Why is no one asking them to hand some of the money back, it should be their number one responsibility.

    Every week the prices are going up and im forever looking for more ways to cut our families outgoings. The VAT increase will only make matters worse as it WILL have a butterfly effect on everything.

    The Government need to do something about the high price of fuel for the household. And petrol, why is it so high when the price of a barrel is much lower now than it was when the energy suppliers added 40% to their bills. A few hundred years ago we would have all marched on Whitehall, rather than sit back and let it happen.

    I for one can’t wait until we have the chance to get this lily livered government out.

  2. stiggy
    December 16, 2010 at 5:22 pm

    Thir article is 100% correct. All the supermarkets have gradually hiked their prices over the last 2 months. Come the vat rise next month, watch their ads on TV declaring that they wont raise their prices for their dear customers. Wake up people! You are already paying for it.

  3. merlin
    December 14, 2010 at 12:20 pm

    I cannot remember a year when prices have gone up sp much, yet the government does absolutely nothing to protect people. I for one am dreading next year because I know that really important items, including food will be so expensive.

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