The dreaded day has arrived. Today is the day that VAT has been increased to 20%, a rise of 2.5%. The government claim it is the “least damaging” way to save money, but other people have other ideas.
For the everyday items the VAT increase will not make much difference. For example, something that cost £100 yesterday will now cost you an extra £2.13. The more expensive things though, like furniture, kitchens and boilers, will cost considerably more now with that extra 2.5%.
The VAT rise is expected to severely impact the job market, with the Chartered Institute for Personnel and Development claiming that 250,000 jobs will be lost in the UK. The construction industry is also expected to take a hit, with the Federation of Master Builders (FMB) claiming that 11,400 construction jobs over the next decade will be lost.
The FMB believe the VAT rise will make matters worse, in a time where the construction industry has been badly hit by the recession. Train4TradeSkills spoke to the FMB’s Brian Berry back in November, when he was urging the government to reduce VAT in the “Cut the VAT” campaign. Mr Berry said:
“The VAT increase will result in a two per cent decrease in demand for domestic repair, maintenance and improvement (RMI) work which will mean 11,400 job losses in construction alone by 2019.
This will seriously affect the recovery of the construction industry, when it comes, as there won't be enough skilled workers available."
The reality of the VAT rise is that electricians will have to charge more for work, as everything will cost more. This will lead to a decrease in demand as homeowners will either try to do the work themselves or may even opt for rogue traders, according to the FMB, who claim they can “make VAT disappear.”
The government meanwhile, believe the increase in VAT is the best way for the country to dig itself out of the huge hole it is in. Chancellor George Osborne has described it as, “a tough but necessary step towards Britain’s economic recovery.” It’s also permanent, so we will have to get used to it.
What do you think about the VAT rise – is it genuinely something to be worried about or will things just carry on with normal?
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