Thread: UK VAT Reduction

Chancellor Alistair Darling has cut VAT from 17.5% to 15% in his pre-Budget report as part of an £20bn package aimed at kickstarting the UK economy.

But a new tax rate for earnings over £150,000 - and all National Insurance - will increase to help pay for it.

And duties on alcohol, tobacco and petrol will rise so the price remains at their current level.

Mr Darling said he wanted to soften the blow of a recession with the UK economy officially set to shrink next year.

But shadow chancellor George Osborne, for the Conservatives, accused Mr Darling of "bringing this country to the verge of bankruptcy" by doubling the national debt, setting up "a huge unexploded tax bombshell timed to go off at the time of the next economic recovery".

Lib Dem treasury spokesman Vince Cable said VAT cuts would not boost consumer spending and "it would be much more sensible to put money directly in the pockets of low paid workers by cutting their income tax".

In his Commons statement, Mr Darling slashed economic growth forecasts for next year from 2.75% to between minus 0.75% and minus 1.25% - the biggest downward revision on record.

ut he said the government would inject an extra £20bn into the economy, or 1% of GDP, in a bid to get the economy moving again funded in part by an extra £5bn in efficiency savings and a big increase in government borrowing.

Top rate tax will increase to 45% from 2011, for people earning more than £150,000 a year and all National Insurance contributions and from April 2011 all rates of National Insurance (NI) contributions will be raised by 0.5% for employees and employers.

The starting point for NI will be brought into line with that of income tax so that no-one earning under £20,000 would pay any more contributions as a result, the Chancellor said.

On borrowing, Mr Darling said it would be "perverse and damaging" to stick to government rules in the current crisis so they would be temporarily suspended.

'Extraordinary circumstances'

Government borrowing would more than double to £78bn this year and £118bn next year, before starting to come down, with books not to be balanced again until 2015/16.

"If we did nothing we would have a deeper and longer recession that would cost the country more in the long term," Mr Darling told MPs.

"In these extraordinary circumstances allowing borrowing to rise is the right choice for the country."

In other measures, Mr Darling speeded up the introduction of rises in child benefit and slowed down the introduction of increases in vehicle excise duty.

This year's increase in the income tax personal allowance of £120 a year for basic rate taxpayers will be made permanent and increased to £145 in April, helping 22 million basic rate taxpayers - another 500,000 households not just this year but for good.

The 45% top rate will not come into effect until after the next general election, meaning Labour will not break its 2005 manifesto commitment on raising income tax.

The cut in VAT comes into effect on Monday in time for Christmas shopping and will last for 13 months.

Mr Darling's Commons statement heralds the biggest shake-up of Labour's economic policy since it came to power in 1997.

I'm not really sure what to make of all this :3084:

Originally Posted by CompuSupport

I'm not really sure what to make of all this :3084:

Well... the UK is skint and the Government are giving away and borrowing more money.
Not a shrewd financial decision.

Originally Posted by CountryBoy

Well... the UK is skint and the Government are giving away and borrowing more money.
Not a shrewd financial decision.

Well the UK is Skint yes, But so is America. They just keep borrowing more and more money which is not actually there. Infact America exists on One big Debt. So I suppose we are just following Suit. :3084:

They get huge amounts of money from the taxpayer most of which is chucked down the drain anyway. So much for ex chancellor gordon and his prudence tony blair managed to escape at just the right time.

Originally Posted by Menthol

... tony blair managed to escape at just the right time.

Not with his reputation intact though.

I think he'll be forever remembered for running behind Dubya to Iraq.

Amazing how MPs can find money all of a sudden if they need to buy really big guns.

Originally Posted by Halobitt

Not with his reputation intact though.

I think he'll be forever remembered for running behind Dubya to Iraq.

Amazing how MPs can find money all of a sudden if they need to buy really big guns.

Finding those WMD's is an expensive business.

Re: WMDs, I think Hans Blix had the best comment:

It is somewhat puzzling, I think, that you can have a 100% certainty about the weapons of mass destruction's existence, and zero certainty of where they are.

They should have sent tony robinson and c4's time team over to help look for them it would have been a lot cheaper.