A CABINET rift has opened up over whether VAT should rise to its previous rate at the end of the year.
Retail and hospitality executives, who have campaigned for months against the change, were buoyed last week when Harriet Harman said the planned rise from 15 per cent to 17.5 per cent on January 1 was “under review”.
But yesterday chancellor Alistair Darling insisted he was sticking to the planned deadline.
Business leaders and economists argue the Treasury can afford to postpone the planned increase by a month because VAT revenue has fallen by £800 million less than expected – the equivalent of a month’s tax.
Michael Ward, the managing director of Harrods, said only a “congenital idiot” would put up VAT on New Year’s day – a bank holiday at the start of the January sales.
And British Retail Consortium head Stephen Robertson, said the deadline will be a nightmare. “It not only takes money and manpower but also puts a massive amount of additional stress on changing systems and thousands of prices,” he told City A.M.
“We’ve had conversations with the Treasury and basically want them to give retailers enough notice.”