a rise in Value Added Tax to 18.5%

  Seth Haniel 08:17 26 Nov 2008

was in the government's plans until less than a week ago, the BBC understands.

click here

  newman35 08:55 26 Nov 2008

The cut of 2.5% has been met with total apathy as far as I see - people saying it's a meaningless amount - yet when a 1% change is mooted (from 2011)it becomes scandalous??
In principle I disagree with VAT being used as it impacts far more on the less well off, anyway.

  natdoor 08:55 26 Nov 2008

There is a difference between something being under consideration and being part of a plan. There must have been many ideas which were considered but rejected. To imply that this change WILL be made in the future is just political muck-raking. Of course, circumstances might require it, just as Thatcher raised VAT fom 12.5% to 17.5% without announcing the intention to do so before the election while at the same time promising no increase in taxation, by which we subsequently learned meant no increase in income tax.

  wids001 09:19 26 Nov 2008

Thatcher actually raised VAT from 15% to 17.5% to enable a cut in the hated Poll Tax.

  lofty29 09:29 26 Nov 2008

Anyone with half a brain should be aware that after the next election, no matter who wins, there will have to be massive cuts in public spending and tax rises for everyone.

  natdoor 10:30 26 Nov 2008

I guess my memory failed me. Of course, in 1979 VAT was raised to 15% from the previous levels of 8% and 12.5%. The raise to 17.5% came later. I do not remember any accompanying reduction in poll tax.

These changes were regressive and I believe that the money raised, along with oil revenues which were a new contribution to state funds, was used to pay disability allowances to fit people thrown out of work by government policies in order to keep the unemployed figures down. While this gave the people concerned more money than unemployment benefit, it was not done on compassionate grounds, although this was probably the motivation of the GPs who made the (false) diagnoses, and it has caused long-term harm to those involved by destroying their work ethic and is something for which we are still paying dearly.

  beeuuem 11:40 26 Nov 2008

Not a lot of difference then between the parties. Messrs Blair and Brown promised the income tax would not go up under Labour. What they forgot to mention was that they would create a whole raft of new taxes which would cost everyone more than an increase of 4p in income tax.
Is there a great deal of difference between your suggestion that disability benefit is a form of fiddling the employment figures and 'creating' some 500,00 'jobs' in the public sector to obtain the same result other than the latter is probably more expensive?

There was a report last weekend that the reduction in VAT would be recouped by an increase to 18% in 2010 and then to 20% in 2011. A decrease of 2p in the pound is hardly going to make everyone rush out and buy. An increase of of 5p in the pound on top of higher taxes would really dampen any recovery.

  interzone55 14:04 26 Nov 2008

The rise from 15% to 17.5% was to help bail the country out of the mess caused by trying to join the European Exchange Rate Mechanism.

click here
click here

All the Daily Mail readers seem to be glossing over this dark period for Thatcher's government...

  natdoor 14:38 26 Nov 2008

At least the statement was specifically about income tax and thus completely clear.

There may have been additional jobs in the public sector created but there have also been rationalisations and job reductions in other areas of government in line with the Gershon plan. Can you personally attest that any new jobs created in the public sector are nugatory and designed to keep unemployment down, or is that the Daily Mail speaking?

I don't understand where your 5p in the pound comes from. Are you suggesting that VAT will go up to 22.5%? The point about the VAT reduction is not that it will immediately induce people to go and spend but, over time, the accumulated savings will enable them to buy things which they otherwise would not have been able to do. And, if as some suggest, shopkeepers do not pass it on then that may enable them to stay in business and employ people who would otherwise be made redundant. £12.5 billion injected into the economy will not just disappear.

  tullie 16:02 26 Nov 2008

I believe that i am going to save 3p on a packet of biscuits!

  natdoor 17:13 26 Nov 2008

Since VAT is currently 17.5% and we have been used to that for many years, that should be the benchmark for measuring any future rise, not the temporary 15%.

Having read beeuuem's post again, I now think that he was referring to the increase in income tax to 45% for those earning over £150,000. It probably will affect investments rather than purchase of goods.

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