A leading policy think tank has slammed the expected VAT hike, claiming a bank tax would be a fairer way of cutting the deficit.
The Institute for Public Policy Research (IPPR) says the improved economic conditions should allow banks to pay an additional £20bn a year in tax. It claimed the tax revenue could be siphoned from the £90bn profit UK financial services will bring in this year.
The coalition government is widely expected to raise VAT from 17.5 per cent to 20 per cent in George Osborne’s emergency budget on 22 June.
Tony Dolphin, IPPR chief economist, said: “An increase in VAT would hit ordinary people hardest, particularly those on low incomes.
“By contrast Robin Hood taxes on the financial sector would be paid disproportionately by the wealthiest in society.”
The Forum for Private Business (FPB) also called for VAT to remain at its current level. A spokesman told City A.M.: “A rise to the level of VAT that has been suggested would hit small retailers very hard.”