Emergency Budget: VAT to rise

Percy1983

When it dropped to 15% my first thought was "when will it go to 20% to make up for it".

angelizz

What annoys me isn't the fact there has been a VAT rise but Labour's objections to it and their jeers in the House of Commons. There is no doubt at all in my mind that they too would have raised VAT to 20% (after all they caused this mess in the first place).

78mjt

This won't hit consumers, it will hit small businesses. Think of any business that prices its product psychologically below a certain price point - say at £99.99. Their prices will have to go up to £102.50 to make up for the VAT, which they obviously won't do.
Therefore they'll lose £2.50 for every sale that they make. This might not sound like a lot, but if they sell say 10,000 units a month and work on small margins it could kill them. The alternative? Put their prices up and lose sales - it's a lose/lose situation.

angelizz

78mjt wrote: »

This won't hit consumers, it will hit small businesses. Think of any business that prices its product psychologically below a certain price point - say at £99.99. Their prices will have to go up to £102.50 to make up for the VAT, which they obviously won't do.
Therefore they'll lose £2.50 for every sale that they make. This might not sound like a lot, but if they sell say 10,000 units a month and work on small margins it could kill them. The alternative? Put their prices up and lose sales - it's a lose/lose situation.

It's a lose/lose situation but what other choice did this govt have? Don't blame this govt for having to raise VAT to clean up the mess left by the last one.

78mjt

angelizz wrote: »

It's a lose/lose situation but what other choice did this govt have? Don't blame this govt for having to raise VAT to clean up the mess left by the last one.

I'm not blaming this government Angelizz, I'm just pointing out that some businesses will go to the wall due to the decision. I agree that this perhaps has to be done, maybe if VAT wasn't dropped to 15% during the last parliament it could have been avoided?

JasonLVC

angelizz wrote: »

What annoys me isn't the fact there has been a VAT rise but Labour's objections to it and their jeers in the House of Commons. There is no doubt at all in my mind that they too would have raised VAT to 20% (after all they caused this mess in the first place).

The Labour government accidently released budget papers indicating a VAT increase to 19.5% after the 15% reduction (ie, it would have gone from 17.5% to 15% to 19.5%) but was then withdrawn from publication a day or so later.

The run up to the election, all parties stated they wouldn't increase VAT but in reality, all three would have done. Not doing so begs the questions, how else to tackle the deficit and so we'd either get no VAt increase but continue into the abyss or a VAT increase post election. Which is what we've got!.

bp78

78mjt wrote: »

This won't hit consumers, it will hit small businesses. Think of any business that prices its product psychologically below a certain price point - say at £99.99. Their prices will have to go up to £102.50 to make up for the VAT, which they obviously won't do.
Therefore they'll lose £2.50 for every sale that they make. This might not sound like a lot, but if they sell say 10,000 units a month and work on small margins it could kill them. The alternative? Put their prices up and lose sales - it's a lose/lose situation.

Completely agree that this will be a disaster for small businesses. This is what happens when the banking sector is allowed to run wild and risk all for a quick buck, and when investment bankers get paid on turnover, not profit. Don't blame the conservatives, the state of the country's finances lays at someone else's door.

artha

angelizz wrote: »

What annoys me isn't the fact there has been a VAT rise but Labour's objections to it and their jeers in the House of Commons. There is no doubt at all in my mind that they too would have raised VAT to 20% (after all they caused this mess in the first place).

Not quite accurate. It was the US financial institutions that caused the global mess. All our government did was to try and deal with it as best they could. To make a true judgement you have to decide whether the tories would have a made a better fist of it. I would however agree that the extent of the mess in this country has been due to overspending on things that were not necessary to combat the global recession.

I'm not defending the labour goverment but get frustrated when people assume that the Uk is in a mess and it's all the fault of the government and life elsewhere is hunky dory. Just be thankfull we didn't have a greek style goverment or as well as increased taxes many people would be taking a pay cut

zierisaver

As has been posted above, this will NOT AFFECT THE PUBLIC BUT WILL CRIPPLE SMALL BUSINESSES. many of you are posting that you didn't notice the VAT reduction, that's because smaller companies, restaurants, etc, did not change their prices - why would they? They would end up with ridiculously priced items; imagine going to your local restaurant and seeing the price of a pizza dropping from say £12 to £11.70ish? It wouldn't happen, and similarly they won't now put the prices up, as it would look ridiculous.

Agree with the point above. Any company that sells a few items but prices them just below a certain amount, for example £99.99 or £149.99 is going to lose out big time.

duckbrfc

artha wrote: »

Not quite accurate. It was the US financial institutions that caused the global mess. All our government did was to try and deal with it as best they could. To make a true judgement you have to decide whether the tories would have a made a better fist of it. I would however agree that the extent of the mess in this country has been due to overspending on things that were not necessary to combat the global recession.

I'm not defending the labour goverment but get frustrated when people assume that the Uk is in a mess and it's all the fault of the government and life elsewhere is hunky dory. Just be thankfull we didn't have a greek style goverment or as well as increased taxes many people would be taking a pay cut

Bear in mind that the Labour government had given the City traders carte blanch to do what the wanted, based on the fact that the City contributed some 25% of TOTAL corporation tax in 2008. Vince Cable warned about the problems we faced:
In November 2003, Cable asked Gordon Brown, then Chancellor, "Is not the brutal truth that ... the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level?"
I have seen the clip of this from the House of Commons - Brown derided Cable for his comments.
So, IMO, the blame does lie at the feet of Labour, as well as the reckless traders on both sides of the Atlantic.