VAT rise

[okra]

Experts predict the rise will cost the average family (whatever that may be) £520 a year. That is £10 per week. I don;t know how they arrive at these figures at 2.5p in the pound, on VAT rated goods only. that means the average family needs to spend £400 per week to pay an extra £10.

I don't know many average families that spend this much a week on VAT rated goods.

People will undoudtedly have less money to spend and I can only see more unemployment as a result

[Green Aura]

I've just read an article on BBC News saying that round these parts the VAT rise on fuel could put the price up to £1.45 a litre! Thank goodness I only go out in it about once a month!

[okra]

Thats £6.70 a gallon in old money!!!!!!!!!!

[Big Al]

£520 a year. That is £10 per week. I don't know how they arrive at these figures at 2.5p in the pound, on VAT rated goods only. that means the average family needs to spend £400 per week to pay an extra £10.

I don't know many average families that spend this much a week on VAT rated goods.

It might include the likes of big ticket items like holidays, cars and a lot of take aways averaged out over the year. To pay that extra amount it only means you have to spend £20800 on vat related good s to clock up the extra £520 which yes might be a lot for people on here but someone buying a 2million pound yaught will take most of the tax burdon for all of us on here hence the average.

I do a spreadsheet every year of my income and outgoings so this year I'm adding in an extra columb to account for the extra 2.5% to see what it costs me........ obviously I have too much time on my hands.

Al

[citizentwiglet]

Must admit, we went out yesterday and bought a new microwave. Ours broke in October and, to be fair, it was third-hand when we got it (free) and it lasted us 8 years before packing in (it was the magnatron, dontcha know?); and I had asked on Freecycle and looked at the ads for a second-hand one before buying one. The shops were mobbed! You know how normally, you walk into an electrical shop and immediately get pounced on by a commission-based salesperson? Well yesterday I stood next to a £700.00 coffee machine and didn't even get noticed....

You ONLY need to spend £20800 on VAT related goods??? That's more than we earn in a year!

Have noticed, however, that our 'kindly' supermarkets are bearing the brunt of the increase and not passing it on, immediately, to their customers. How? By putting up the prices of the NON VAT goods, that's how. Fruit and veg have gone up yet again (always does in the Winter, I know, but this is a massive increase), bread flour is up, yeast is up, eggs are up over 20p for 6 in the space of a week. So, if you're in TescNos buying a telly or a laptop, you're sorted. If you're actually trying to feed your family on healthy basics, you're f%cked, longterm. Still, they're doing cheapos on the crappy food......every little helps, doesn't it??? Grrrr.

[The Riff-Raff Element]

Have noticed, however, that our 'kindly' supermarkets are bearing the brunt of the increase and not passing it on, immediately, to their customers. How? By putting up the prices of the NON VAT goods, that's how. Fruit and veg have gone up yet again (always does in the Winter, I know, but this is a massive increase), bread flour is up, yeast is up, eggs are up over 20p for 6 in the space of a week. So, if you're in TescNos buying a telly or a laptop, you're sorted. If you're actually trying to feed your family on healthy basics, you're f%cked, longterm. Still, they're doing cheapos on the crappy food......every little helps, doesn't it??? Grrrr.

That does sound jolly nice of them!

The profit on basics is relatively small, and it is a constant source of irritation that while customers are legally permitted to make their own bread (a hazardous and antisocial practice that they would like to see stamped out) someone will supply them with bread flour. And if anyone's going to be the supplying it's going to be them.

The problem for the supers and their suppliers is that it is very difficult to adulterate a raw material like an egg or a cabbage. Ready meals on the other hand are an inviting repository for any for any old rubbish they can hide in them - cheap saturated fats, bulky starches and - best of all - water. That's where the "real" money is and that is where they will push the hardest.

BTW, we've had VAT in France on food basics for years at 5.5%. It's not a sacred cow.

[Flo]

Fruit and veg have gone up yet again (always does in the Winter, I know, but this is a massive increase),

That's due to the snow and not to the rise in VAT - at the moment there's a dearth of fresh veg because a lot rotted in the ground with the snow and frost - winter cabbages and leeks for instance which can't be stored in a clamp like root vegetables. It's not just allotment holders like me who will have lost stuff due to snow.

eggs are up over 20p for 6 in the space of a week.

Same again - the weather affects the laying rate and it's been/still is exceptionally cold with snow around in a lot of areas

Likewise fresh food such as veg and eggs will be affected by the rise in transport costs and fuel has been rising before the VAT went on. So the VAT is only an indirect cause at the moment - but prices won't come down when the new harvests come in during the summer and the weather improves because the VAT on the fuel to transport stuff will have to be covered.

It's a hard call as to the effect of the VAT rise at the moment because the thoroughly nasty winter weather is affecting some goods at present. Wait till summer six months hence and then look at prices.

[123sologne]

I was going to say something along the same lines as you, Flo.
I am not sure if in that average cost to family, they are actually adding the extra cost on everything due to petrol price going up. The price of shop deliveries will have to go up so the hauliers can pay their own bills... This actually means that with the new vat, everything will have to go up even items which do not have vat on, as they all have to be delivered to the shops...

[wulf]

Unfortunately, it isn't simply the case that prices will rise 2.5% because VAT has risen 2.5%. Retailers are still going to be looking at the final ticket price. A piece of research from France showed that people tend to be much more likely to be drawn by prices that end with a 9 than with a zero. I suspect that some £9.99 things will stay there but others will jump to £10.49 or even £10.99.

To be fair, that will probably partly be covering areas in which profits have been allowed to shrink over recent years in order to maintain the same price tag. Fortunately, not being wasteful or greedy will still remain as the best ways to look after your money!

Wulf

[contadina]

I think I remember reading somewhere that VAT in France accounts for 50% of state revenues. Italy has similar tax rates, but I suspect the state receives only a little of it as it's still common practice for shop, restaurant and a hotel owners to ring up a much lower amount than goods bought, so they file less tax. For most goods and services a 20% value added tax is charged in Italy. VAT on food products is 10%, while VAT on bread is 4%.

In case you are interested here's a look at VAT charges around the world (it's not entirely up-to-date, but it should give you can idea).
http://www.worldtaxpayers.org/stat_vat.htm

[jim]

VAT benefits those with the most money and penalizes those with least. A £10 per week rise in expenditure is less onerous when earning over £50,000 pa than when bringing home less than £15,000 pa. (Notional figures for example only! I don't even earn anywhere near the lower figure.) Sir Phillip Green keeps his money in Monaco not Britain, there is little or no income tax there while VAT is high. (Wonder why? See above!)

Add to this the fact that VAT is collected on behalf of the Government by businesses, meaning there is less expenditure on tax gathering for greater income.

Watch out also for product shrinkage. The practice of keeping packaging and price at previous levels whilst allowing the amount of product exchanged for your hard earned to decrease. Toblerone (no, I don't eat it!) have already done this by cutting 1 triangle off of their bars in order to keep them below £1.00. There are also rumours that pubs are to be allowed to serve beer in schooners (2/3 of a pint) whilst charging punters the old pint price.

Just as well grocers aren't allowed to put iron filings in tea to bulk up the weight any more. (Government regulations can change however!)

Love and Peace
Jim

[okra]

Besides hitting our pockets the VAT rise will cause job losses. The Chartered Institute of Personnel Development has predicted that the VAT rise, along with the government's spending cuts, will see more than 1.6 million jobs lost in both public and private sectors by 2016. CIPD chief economic adviser John Philpott warned last year that 250,000 private-sector jobs losses will come from the VAT rise alone.

[Rosendula]

Does anyone know if VAT will rise to 20% on gas and electric in the UK? If it is, that will make quite a big difference to a lot of people, as it has been 5% for quite a while now.

[boboff]

No rose it's staying at 5% on heating.

The rise in personal allowance in April means that everyone paying tax will be at least £200 a year better off.

You would need to buy £160 ( the equivalent that make 2.5% the £4 a week) of VAT good a week to negate this possitive from personal allowances.

Child Tax credits will increase by £150 a year. These measures are specifically designed to reduce the impact on low income families of the VAT rise.

Someone earning £50k a year buying a new car however stumps up a fair additional lump.

Supermarkets work on a margin mix, net of VAT, this will mean that when the catagory review time comes prices will reflect the change so the overall catagory gives the right margin, in all probability a profiessional buyer would have had to have factored this into the mix, with prices and products currently on sale.

The £13 billion a year is a help to the economy.

With VAT at 20% it does make it easier to work out the net price now, divide by 6, before at 17.5% you had to multiply by 7 and divide by 27, when at 15% it was multiply by 3 divide by 23, so it should save accountants about 3 minutes a week as well.

[Rosendula]

Thanks Boboff. Very helpful. :-)