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Vat Change Will Be Used To Hide 8Pc Price Rise

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http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8237844/VAT-change-will-be-used-to-hide-8pc-price-rise.html

The cost of many goods and services will rise by more than three times the rate of the VAT increase as businesses use the tax to mask a more dramatic price review, leading industry experts warn today.

The rate of Value Added Tax rose by 2.5 percentage points at midnight, from 17.5 per cent to 20 per cent – an attempt by the Coalition to reduce the deficit. But analysts believe many gyms, mobile phone companies, restaurants and shops will raise their prices by between 5 per cent and 8 per cent, or possibly more.

To recoup the escalating cost of petrol, energy, cotton and other key commodities, they are expected to use the tax change to obscure far larger price increases. This could add far more to a family's annual expenditure than previously expected.

Wealthier families are likely to pay considerably more. Calculations from Deloitte, the accountants, suggests couples with a combined income of £70,000 will see their spending rise by £560.

Ed Miliband, the Labour leader, said yesterday that the VAT rise would cost the average family almost £400 a year and put 250,000 jobs at risk.

Excellent news for aggregate demand. Clearly a huge demand for services so better put up prices.

If prices do go up I wonder how long they remain higher for, or are we going to see more offers?

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http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8237844/VAT-change-will-be-used-to-hide-8pc-price-rise.html

Excellent news for aggregate demand. Clearly a huge demand for services so better put up prices.

If prices do go up I wonder how long they remain higher for, or are we going to see more offers?

...I can see price wars....when the jobs are not there, the sellers will have fewer willing customer that are happy to pay the price...when people need work they will work for less, sell their services for less and spend less. ;)

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That in itself isn't a problem as service side prices have been rising like mad for ages. The key for people is food and clothing, and of course the original purpose of this site, housing.

A few less trips to the gym, the restraunt and dumping the mobile phone won't hurt anyone.

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8%? That's off the charts, so to speak.

cpimktnov10large.gif

Don't look at moron-liar charts - they will do you no good.

Without equivalent income increases discretionary spending will have to fall off a cliff. Now, as a large part of the economy and employment is based on this discretionary spending the effects are not too difficult to judge.

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http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8237844/VAT-change-will-be-used-to-hide-8pc-price-rise.html

Excellent news for aggregate demand. Clearly a huge demand for services so better put up prices.

If prices do go up I wonder how long they remain higher for, or are we going to see more offers?

VAT has been increased over here aswell this year so noones escaping, its 8% now, preposterous

Edited by Tamara De Lempicka

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I recently bought an item of clothing for my other half, from a shop in Sweden. I paid 25% VAT! Back home in Belgium it's about 21.5%, although I can claim the tax back on certain items (if I can be bothered with the paperwork).

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...I can see price wars....when the jobs are not there, the sellers will have fewer willing customer that are happy to pay the price...when people need work they will work for less, sell their services for less and spend less. ;)

Corporate giants such as Tescos, etc could easily absorb the VAT rise.

I always buy on ebay or Amazon for all of my non food goods and save a 1/3 anyway.

How many people living decidantly, buy the newest of everything once it comes out. If people lived within their means, demand would drop and so would prices.

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I recently bought an item of clothing for my other half, from a shop in Sweden. I paid 25% VAT! Back home in Belgium it's about 21.5%, although I can claim the tax back on certain items (if I can be bothered with the paperwork).

25% VAT, nice.

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Whilst I'm sure in the short-term, the VAT hike will be used as an excuse to rip us off, market forces will come to the fore eventually. Prices largely reflect what people are willing to pay for the goods, not what the goods cost to the retailer. The raw materials cost in most of the stuff we buy is a neglible proportion of the retail price.

The wheat in loaf of bread is less than 10p (OK no VAT on that but you see what I mean), Nike trainers cost £2.40 to make. The other week there was the programme about sweat shops in Leicester supplying well known fashion chains, typical retail mark up on clothes was around 1000%.

I strongly suspect most of the retail price we pay is made up of rent for the premises. If the money available for this is reduced, that can't be a bad thing for us.

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8%? That's off the charts, so to speak.

cpimktnov10large.gif

The thing I don't get about the inflation predictions on those fancharts, is how do the BoE factor in the effects of their own interest rate policy?

Is the return to 2% inflation what they think will happen if they continue to do nothing?

Are they assuming they are going to raise interest rates to bring inflation back to 2%?

Are they saying their policies don't have any effect, in which case what exactly is their job?

It's a logical paradox. I really see no difference between this stuff and witch doctors. They act like they know what they're doing because it makes people feel better, but in reality they have little or no understanding of how these things work. When it seems like they've applied a successful cure it's usually just that the patient got better on his own.

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According to the news Milliband was saying the VAT increase would hit the poorest most.

Osborne was saying - No! It won't it's a fair tax.

To which Milliband says - But before the election when you claimed Labour was going to increase VAT by the same amount you said it would hit the poorest most (and that would be in Hansard).

You do get a laugh as you go along.

Milliband might not be all that but he seems to be running rings around them on that topic.

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Milliband might not be all that but he seems to be running rings around them on that topic.

Not really, because the simple answer is "It was your party that got us into this trouble in the first place", to which there is no answer.

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Not really, because the simple answer is "It was your party that got us into this trouble in the first place", to which there is no answer.

Indeed that is one of the answers but the point is that Osborne didn't think to say that. He put himself in a position where his own electioneering words could be widely quoted against him. Just like the LibDems words before the election and just after the election.

In fact there are all sorts of reasonable answers he could have given instead.

Edited by billybong

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Corporate giants such as Tescos, etc could easily absorb the VAT rise.

I always buy on ebay or Amazon for all of my non food goods and save a 1/3 anyway.

How many people living decidantly, buy the newest of everything once it comes out. If people lived within their means, demand would drop and so would prices.

VAT rise is neither here nor there - competition largely determines retail prices. The retailer can never really absorb a VAT rise VAT is a, now, 20% tax on everything VATable you buy.

This would be true if we still manufactured the goods we buy.

Demand here has little effect on the factory gate price in China in a globalised economy.

Edited by Soon Not a Chain Retailer

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Indeed that is one of the answers but the point is that Osborne didn't think to say that. He put himself in a position where his own electioneering words could be widely quoted against him. Just like the LibDems words before the election and just after the election.

In fact there are all sorts of reasonable answers he could have given instead.

Reneging on pre-election promises is hardly any sort of disturbing new thing. Osborne could always ask Ed Miliband if he thinks having a pledge card makes a party more or less likely to keep promises.

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Reneging on pre-election promises is hardly any sort of disturbing new thing. Osborne could always ask Ed Miliband if he thinks having a pledge card makes a party more or less likely to keep promises.

It's more endemic, blatant and regular in UK politics than it ever was which isn't good and he walked into Milliband highlighting the deceit.

He wasn't reneging on a manifesto pledge (or card as far as I'm aware) he was contradicting his own words when he didn't have to as there were plenty of other reasons he could have given which wouldn't have highlighted the obvious deception.

Edited by billybong

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What's always forgotten by those who think that a poor economy will cap inflation is that inflation is a result of SUPPLY side as well as demand and money supply. Companies will not make and sell products at a loss, they will instead cut back/cease production or sell the product into another market where they can make a profit.

If supply side prices are rising because of a depreciating currency and sky high commodity prices, then consumer prices can and will rise irrespective of whether or not people are getting pay rises or are losing their jobs. It just means that the public are forced to see a reduction in their standard of living as their spending power decreases.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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