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VAT Rise Detrimental to Small Businesses
Listed under: News
Published: Thursday, May 27, 2010
Raising the VAT rate to 20% could cost the UK up to 163,000 jobs over the next four years and see consumers reduce their expenditure by a staggering £3.6 billion, according to one of the country's leading business support groups, the British Retail Consortium (BRC).
Arguing that an increase in VAT will inevitably translate into a lower demand for goods and services as prices go up and companies' margins are affected, the organisation has warned that many businesses will be left with no option but to reduce their budgets over the next year, seeing them employ fewer people and hold back on job creation.
The BRC has also attacked the Government's plans to increase employees' National Insurance Contributions by one percent and employers' by 0.5%, suggesting it will reduce job numbers by 25,000 in the first year and see the overall number of positions available fall by 109,000 over the next four years. The group has also warned that consumer spending is also likely to be affected, contracting by £948 million in the first 12 months alone.
Commenting on the Government's measures, Stephen Robertson, director general of the BRC, says, “For the first time, we have clear, independent evidence showing VAT and NI increases will have a deep and long-lasting impact on jobs and growth. The budget deficit is serious and has to be tackled, but proposals must be judged against the implications for jobs and growth revealed by this new information.
He adds, “Business growth will get the country out of the hole it’s in, led by retail. The Government must now deliver a route to stability that supports companies and customers by avoiding damaging tax rises.”
Arguing that an increase in VAT will inevitably translate into a lower demand for goods and services as prices go up and companies' margins are affected, the organisation has warned that many businesses will be left with no option but to reduce their budgets over the next year, seeing them employ fewer people and hold back on job creation.
The BRC has also attacked the Government's plans to increase employees' National Insurance Contributions by one percent and employers' by 0.5%, suggesting it will reduce job numbers by 25,000 in the first year and see the overall number of positions available fall by 109,000 over the next four years. The group has also warned that consumer spending is also likely to be affected, contracting by £948 million in the first 12 months alone.
Commenting on the Government's measures, Stephen Robertson, director general of the BRC, says, “For the first time, we have clear, independent evidence showing VAT and NI increases will have a deep and long-lasting impact on jobs and growth. The budget deficit is serious and has to be tackled, but proposals must be judged against the implications for jobs and growth revealed by this new information.
He adds, “Business growth will get the country out of the hole it’s in, led by retail. The Government must now deliver a route to stability that supports companies and customers by avoiding damaging tax rises.”
