The majority of the British public does not agree with the decision to raise VAT from 17.5% to 20%, with many believing that the move will harm the economy. However, on the whole, the public would prefer a VAT rise than any further hike in income tax.
- 62% disagreed with the decision to raise VAT to 20%
- 25% agreed
- 48% think the rise in prices and reduction in purchasing power will harm the economy
- Compared to only 25% of people who think the VAT increase will help the economy
- However, 52% would rather raise VAT than increase income tax from the standard rate of 20% to 22.5%.
Perhaps unsurprisingly, there is a significant difference of opinion across party lines on the issue; Conservative voters are more likely than their Labour counterparts to think the VAT hike will aid the economy, and are more in favour of the rise in VAT than they would be of any income tax increase.
- 54% of Conservative backers see the economy benefitting from a rise in VAT
- Compared to a tiny 6% of Labour supporters who think the VAT increase will help the economy by reducing the amount the government borrows
- 70% of Conservative supporters would prefer a rise in VAT compared to 19% who would opt for a rise in income tax
- While just 25% of Labour supporters would raise VAT versus 56% who would prefer a hike in income tax.
Taxes and timing
The VAT increase has been justified by the Government as part of a continuing effort to tackle the nation’s huge deficit. In an interview with the BBC, Chancellor George Osborne said that the VAT rise was a ‘tough but necessary step towards Britain's economic recovery’, calling 20% ‘a reasonable rate to set, given the very difficult situation we find ourselves in’.
And although the move has been predicted to raise over £13 billion a year it has faced criticism from the Labour party on the grounds that it will affect low-income families the worst. Ed Miliband, Labour party leader, told the BBC that it is ‘the wrong tax at the wrong time’.