A Budget built around a VAT rise?
The Budget red book (p40) shows the fiscal impact of yesterday’s announcements. It’s striking how much work the VAT rise is doing by 2014-15. It will bring in £13.5bn. No other tax rise comes close. The bank levy will yield £2.4bn. Cutting business capital allowances brings in £1.8bn. Increasing capital gains tax raises a paltry £925m.
The VAT rise rather towers over the impact of measures in Alistair Darling’s March budget too (p55). The national insurance rises combined bring in £9.4bn. Restrictions on pensions tax relief yield £4.6bn. Freezing income tax thresholds produce £1.7bn.
Looking at these figures it’s clear they wouldn’t come close to meeting George Osborne’s (unnecessarily austere) targets without the VAT rise. This leads me to suspect that the VAT hike was pretty much a certainty when the Chancellor sat down to put this Budget together, rather than something that could have been conceivably left out, or delayed, as some suggested.Tagged in: george osborne, VAT
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