A VAT rise makes sense — and is the least painful sting in this bold Budget

Martin Vander Weyer’s Any Other Business

I wrote here in February that I did not believe the Conservatives’ pretence of having ‘absolutely no plans to increase VAT’, and that, having examined this fiercely complex issue at some length with an ice pack on my head, I had come down in favour of a VAT rise — as indeed had the experts at the Institute of Directors, who wrote: ‘The VAT rate should be increased to 20 per cent, in order to allow for more substantial and rapid tax reductions elsewhere than would otherwise be possible.’ That has now come to pass, and despite the howls of protest in the House of Commons when the Chancellor announced it, I’m sticking to my guns. The increase will in many cases be disguised either by retailers’ discounts or by rising import prices as a result of the weaker pound; it is in line with the European VAT average, and it’s a simple way of collecting an extra £11 billion a year in tax revenue now, rising to £13 billion (on the Chancellor’s figures) by the end of the parliament.