The rise in value added tax to 20 per cent, announced in George Osborne’s emergency Budget on Tuesday, could have substantial unforeseen consequences for the British economy, according to new research.
RSM Tenon’s Emergency Budget Poll, conducted ahead of the Chancellor’s statement, found that 39 per cent of people will change their spending habits in response to an increase in the current rate of VAT.
RSM Tenon predict that even more people will follow suit in the coming months, as £11bn of welfare cuts take their toll on consumers’ wallets, forcing many people to tighten their belts even further.
Andrew Hubbard, tax policy director of RSM Tenon, said: “Though generally expected, the rise in VAT will have caused many people’s hearts to skip a beat. Businesses should start preparing themselves for a New Year’s hangover as more and more consumers will inevitably think twice about spending money on anything that isn’t strictly necessary.”
RSM Tenon’s Emergency Budget Poll questioned 500 people across the UK.