The British Retail Consortium has warned that an increase in value added tax would result in a consumer spending decline of £3.6 billion, leading to 163,000 potential job losses.
The news comes as speculation mounts that the Coalition Government will raise VAT to 20 per cent, after announcing plans that National Insurance contributions would be increased by one per cent for employees and 0.5 per cent for employers.
During the run-up to the election, both the Liberal Democrats and the Tories insisted that they had no plans to raise VAT but also refused to rule it out.
“The budget deficit is serious. It has to be tackled but proposals must be judged against the implications for jobs and growth revealed by this new information,” said the BRC’s director general Stephen Robertson.
“Business growth will get the country out of the hole it’s in, led by retail. The Government must now deliver a route to stability that supports companies and customers by avoiding damaging tax rises.”