Funds Insider - Opening the door to funds

Welcome to the Citywire Funds Insider Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error
The VAT increase won’t affect my spending habits
+ Reply to discussion
Options
Rich Harris (Citywire)
Posted: 04 January 2011 09:08:31(UTC)
#1

Joined: 08/06/2010(UTC)
Posts: 126
The VAT increase announced in the emergency budget last June has today come into effect.

Figures vary, but the 2.5% rise, from 17.5% to 20%, is expected to cost the average family around £500 a year. And according to price comparison website uSwitch.com the increase will add £158 a year to essential household bills alone.

The British Beer and Pub Association claims the rise, which will increase the price of beer by 6p per pint in pubs and push the average price of a pint to over £3 for the first time in history, will cause pubs and bars to be among businesses worst affected and begged the government to delay the rise.

Meanwhile, retailers have warned the rise will cause retail sales to fall in 2011 and expected people to bring forward purchases to beat today’s hike.

However, will the hike really stop people splashing out in the sales and buying a pint down the pub? And while £500 does sound like a lot of money, when it’s spread out over the course of the year will we even notice?

If I had been planning to make a particularly large purchase I suspect I would have tried to buy it before today to avoid paying the extra VAT, but in general I really don’t think the increase will affect my spending this year.

Personally, I’m more inclined to throw my toys out the pram over the above inflation increases in train and tube fares and the fuel duty hike…

What do you think? Did you hit the sales early this year to beat the VAT hike? And are you worried about how the increase will affect you?
Back to top Quote
Bernard
Posted: 04 January 2011 13:18:58(UTC)
#3

Joined: 16/06/2010(UTC)
Posts: 14
As in past increases and decreases there is a rash of fantasy figuring,
Ed Miliband says families will have to pay £7.50 a week extra.

Yes if they spend £300 a week on vatable items and services. There is no tax on food or children's clothes.

£300 basic yesterday carried 52.50 tax
£300 today carries £60

An item that cost 117.50 yesterday should be 120 today -an increase of about the cost of a Latte at Starbucks.

The increase is not 2.5 % but just over 2%. 2.5/117.5 x 100.

Brown made similar mistakes when he and Mandelson boasted that pensioners would save £5 a week when they reduced VAT to 15%.
Yes if they spent £235 on vatable items and services.every week. The pension is £97.50 a week.

AND here 's another choice tax story for Ed Miliband.

Council Tax in Lewisham, an iconic Labour Council (the mayor was knighted)

1998 Band A £456 Band H £1367

2010 ...........£901 ............ £2704 ...an increase of 97%

1998 DSS Pension £64 a week

2010.................... £97.65........ an increase of 52%

Promise to link pension increase with earnings never fulfilled.



Back to top Quote
John C
Posted: 04 January 2011 13:22:47(UTC)
#4

Joined: 07/07/2009(UTC)
Posts: 5
As usual the media are hyping the matter out of all proportion. 2.5% is nothing. If you cannot afford £1025 pounds you cannot afford £1000. If the left biased media spent more time explaining why the increase is necessary they would be more helpful.

Back to top Quote
derek farman
Posted: 04 January 2011 13:31:00(UTC)
#5

Joined: 01/05/2009(UTC)
Posts: 45
This VAT increase is a real non event seized upon by our alarmist press and the Milibanders . For the forseeable future there will be enough competition among high street retailers and online retailers to keep prices keen .
Anyway what's wrong with the old adage which was good enough for my parents and grandparents .....'If you can't afford it don't get it !!!!!'
Back to top Quote
Deborah Hyde (Citywire)
Posted: 04 January 2011 14:03:24(UTC)
#6

Joined: 10/06/2010(UTC)
Posts: 36
The worry is that this increase comes even as prices are already rising more than 3% per annum, credit remains thin on the ground and the Bank of England has shown itself unwilling or unable to do what is needed to rein in rising prices.

Given wage growth remains muted and - admittedly small - interest rate increases are looming, I can't be the only person that feels less inclined to splash out than in the past.

Retailers have said they will show restraint but supermarkets are always bragging about how many bargains they have even as the price of an average basket of goods continues to rise.

Will I cut back because of the VAT increase? No. But that is only because I have been tightening my belt over recent months and, given my spending is now limited to bills and mortgage costs plus the odd night out, there is little left for me to cut back on.

Back to top Quote
Rich Harris (Citywire)
Posted: 04 January 2011 14:22:32(UTC)
#7

Joined: 08/06/2010(UTC)
Posts: 126
The government has played it well by introducing the hike when the January sales are in full swing - many if not most VATable goods are still a good deal cheaper now than they were before Christmas. By the time the sales are over we'll be used to VAT being 20%. Bit like introducing a smoking ban in summer when people actually enjoy standing outside.
Agree that it's hard to get upset about beer going up by 6p, but we need to remember a) VAT is a very regressive tax and b) the government made out it was strongly opposed to a VAT hike when in opposition. (Politicians being disingenuous - imagine.)
Still, at least 20% is easier to work out than 17.5%.
Back to top Quote
JEL G
Posted: 04 January 2011 14:32:21(UTC)
#8

Joined: 29/11/2010(UTC)
Posts: 60
I cannot see the VAT increase as affecting my life style whatsoever. I buy only what I can afford anyway.
........ and that is a very good point Rich Harris......... 20% is so much easier to mentally work out than 17.5%.
Back to top Quote
normski
Posted: 04 January 2011 15:18:15(UTC)
#9

Joined: 29/03/2010(UTC)
Posts: 42
Would you not be better off buying a big ticket item tomorrow than in say, 6 months time with inflation at an alledged 5%
Inflation is going to be the bigger problem.
Back to top Quote
Bernard
Posted: 04 January 2011 19:59:33(UTC)
#10

Joined: 16/06/2010(UTC)
Posts: 14
Resistance to the prices of what will inevitably be 90% foreign-made goods might be deflationary.

If only we were allowed to use what were the most potent tools in the British recovery in the 30s - a tariff and a 'Buy British' campaign
tn 1939 British companies sold 350,000 private cars. That revival left us much better prepared for war with car factories rapidly turned over to building tanks and aircraft

I wonder - what is the proportion of foreign-made goods.sold in France and Germany?.
Back to top Quote
David E
Posted: 04 January 2011 22:15:15(UTC)
#11

Joined: 26/09/2010(UTC)
Posts: 1
No one has mentioned it, so perhaps I'm dreaming. During the early days of the banking crisis VAT was reduced from 17.5% to 15%, and returned to 17.5%. That is a bigger increase in proportion than 17.5% to 20%. The return to 17.5% had no fanfare or gnashing of teeth whatsoever.
Back to top Quote
2 Pages12Next page
+ Reply to discussion

Markets

Other markets