A new report shows the Governments rise in VAT could hit not only the poor, but also the middle class heavily, with some areas being particularly drastically hit.
The Government’s proposed rise in VAT from 17.5% to 20% in the new year will hit Scotland, Wales and the North harder than the Southeast and London according to new research by the marketing firm, Acxiom.
The report covered in today’s Daily Mail separated the impact of the VAT rise on discretionary spending into four quartiles. The two quartiles most resilient to the regressive tax rise were overwhelmingly situated in London and the South East. Among the 10 places least likely to be affected by the VAT rise are the Tory heartlands of West Berkshire, Buckinghamshire, Surrey, Hertfordshire, Wokingham, Windsor and Maidenhead, and Oxfordshire where David Cameron’s Witney seat is situated.
According to the report people living in Hull, Windsor and Maidenhead, Blaenau Gwent, Stoke-on-Trent, Leicester, Middlesbrough, Orkney, Eilean Siar, Ceredigion, Merthyr Tydfil, and Gwynedd will be worst affected.
The conclusion of the report outlines that some in the ‘squeezed middle’ will be among the worst affected by the tax change:
“The UK is likely to suffer another collective financial headache owing to the January 2011 rise in VAT. Not only will household expenditure on goods subject to the sales tax rise by more than £6 billion, consumers will also face a drop of more than £2 billion in discretionary income…
“It is the groups that are already overstretched that will feel the biggest impact on their overall household expenditure. What is surprising is that two groups not normally associated with being overstretched – those who are “comfortable” and those with “an acceptable standard of living” – are likely to be put under pressure by the drop in their discretionary income brought about by the rise in VAT. ‘
Among those badly hit will be those with teenage children and large families due to their higher level of discretionary spending and living costs in comparison to other households.
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