Coalition's 20% VAT rate costs families an average of £1,800 over four years


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Families across Britain have been forced to pay an extra £1,800 in tax over the past four years due to the rise in VAT shortly after the coalition government came to power.

The new figures, released by Labour to mark the fourth anniversary this weekend of the VAT increase from 17.5 per cent to 20 per cent, are based on Treasury statistics.

They reveal that the annual cost to a couple with children of a single percentage point rise in the standard rate of VAT is £180 - meaning the 2.5 per cent rise in the tax has cost an extra £450 a year since it was introduced.

This means that these families have paid an additional £1,800 in VAT since it was raised on January 4 2011.

During the last General Election, David Cameron stated: “We have absolutely no plans to raise VAT.”

Yet less than a year later, in January 2011, the tax was raised to its current level.


This comes after a report by the TaxPayers’ Alliance last month warned that the worst-off 10 per cent of families are disproportionately affected by flat-rate taxes like VAT, which take up almost half of their earnings.

Shabana Mahmood MP, Labour’s shadow exchequer secretary to the Treasury, said: “Before the last election David Cameron and George Osborne said they had no plans to raise VAT, but that’s exactly what they did after they got in. These figures show that over the last four years a family with children has paid £1,800 more in higher VAT under the Tories.”

She added: “The truth is that the only people who have got a big tax cut under this Government are those earning over £150,000. And while everyone else faces a cost-of-living crisis, the Tories have refused to rule out another VAT rise in the next Parliament to pay for their £7 billion of unfunded tax promises.”

According to Ms Mahmood, Labour will balance the books “in a fairer way” by cutting taxes for 24 million people through a lower 10p starting rate of tax, freezing energy bills, reducing business rates and expanding free childcare for working parents.

“And we’ll get the deficit down in a fairer way by reversing David Cameron’s £3 billion-a-year tax cut for the top one per cent of earners,” she said.