Schroders economist warns of VAT rise after election
According to Schroders European economist, Azad Zangana, we can expect to see a rise in VAT after the general election.
In their election manifestos, the Labour Government and the Conservative party have not ruled out an increase from the current rate of 17.5%.
Last month, Gordon Brown said he was leaving open the possibility of VAT reaching 20% but items such as children’s clothing and newspapers are set to remain zero rated.
At the end of 2008, the Labour Government slashed VAT from 17.5% to 15%, in attempt to revive the High Street, which was flagging at the time as the UK was in recession.
It then reverted back to the 17.5% rate on 1 January 2010 but speculation has been mounting that the sales tax could increase, no matter which party wins the election.
Mr Zangana comments: “We believe that raising VAT from its current rate of 17.5% to 19% would make not only make a significant contribution to the black-hole in the government’s budget forecast, but it would also be the most efficient way of collecting revenues quickly – as a result, we expect VAT to be raised to 19% after the general election.”