Letter: VAT misnomer

While 2.5 per cent on VAT is an increase of 14 per cent on the current rate of 17.5 per cent, a lot of nonsense is spouted about it costing every family about £400 per year, and even Vince Cable has now agreed the Liberal Democrat election slogan of a "£389 Tory VAT bombshell" was unwise.

By The Newsroom

Published 27th Jun 2010, 22:19 BST

Updated 27th Jun 2010, 22:30 BST

An extra 400 would arise only for families spending about 16,000 on items liable for the full VAT rate. As mortgage interest, rent, council tax, insurance, TV licences, books, newspapers, prescriptions, dental fees, domestic travel, most food, utilities and children's clothes are VAT-free or not subject to the full rate, families able to spend 16,000 a year (after income tax and national insurance) on everything else cannot be considered as deprived.

The extra VAT on a new fridge or washing machine costing 400 would be only 8.51, or on a car costing 10,000 would be 213, hardly deal-breakers; and as many are now made abroad, might well be offset by the stronger pound , also resulting from the Budget, or partly absorbed by the retailers.

However, it would be more sensible, with a few years' transition, to charge VAT on most of the above exclusions, enabling the rate to fall to 15 per cent and to treat us as adults capable of deciding our own patterns of expenditure from a tax-neutral standpoint.

JOHN BIRKETT

Horseleys Park

St Andrews, Fife