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Is VAT set to rise in the New Year?

Alistair Darling has been very vocal over the last few days with regards to VAT and the increase from 15% to the former level of 17.5%. Despite a number of government cabinet members suggesting that the return to 17.5% could be delayed until after the New Year it appears that Alistair Darling is set to get his own way and consumers and businesses are to be hit in New Year.

The government reduced the level of VAT to try to kick-start the UK economy and protect the retail sector, which was and continues to be under significant pressure. However, this particular action is costing the Treasury around £1 billion a month, money which the government can ill afford to give away bearing in mind that national debt continues to rise. While the reversal of the VAT reduction could effectively strangle a recovery on the high street at source, it looks as though the UK government is placing its finances ahead of consumer spending.

If this move is going to happen it is likely to happen well before the next general election thereby reducing the negative headlines as the parties jockey for position.

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