Middle-class families are likely to rein in their spending on foreign holidays following this week’s VAT rise to 20%, according to accountancy firm Deloitte.
The Times reports that the firm’s head of tax policy Bill Dodwell has warned that the 2.5% increase, which is not levied on food or children’s clothes, will affect higher-income families who will face around £600 more in taxes in 2011.
Opposition leader Ed Miliband led a chorus of approval from the Labour party today as he warned that the rise would stifle a nascent economic recovery, caused 250,000 job losses and hit small business’ turnover hard.
People would have less money to spend on domestic travel, hotel stays and activities while away, he said.
Labour says the hike will also deter foreign visitors from travelling to Britain. As well as the 2.5% rise, many businesses are suspected of planning to push prices up further, whilst blaming it on VAT.
by Dinah Hatch
