Commons Backs UK VAT Hike

by Amanda Banks, Tax-News.com, London

19 July 2010

The UK coalition government has survived a tense Commons debate, winning the vote to confirm the increase in VAT to 20%.

Despite attempts by Labour and the Scottish and Welsh nationalists to prevent the increase, the government prevailed with a majority of 75 votes.

Opponents of the increase, which included some Liberal Democrat MPs, feel that the 2.5% hike in VAT would hit jobs and push up prices on the High Street. Scottish National Party spokesman Stewart Hosie branded the increase as "regressive, socially damaging and economically dangerous". Rebel Lib Dem backbenchers had proposed a modest increase of 0.5% whilst the nationalists wished the rate of VAT to remain at 17.5%.

The Labour Party also opposed the increase and voted against it, but the Coalition’s overall majority meant that the increase went through. Labour’s Shadow Scottish Secretary Jim Murphy slammed the Lib Dems who voted in favour of the increase, given the party’s opposition to an increase in VAT during the general election campaign. Murphy said that every Lib Dem MP who voted for it "should hang their head in shame." He added, according to The Scotsman newspaper, that: "This tax will hurt pensioners, the unemployed, and the poorest people in Scotland.”

It is estimated that the VAT increase will cost every household in the UK GBP400 per year.

The new rate of VAT, which was announced in George Osborne’s Emergency Budget last month, will come into effect on January 4, 2011.

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