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SMEs avoid burden of NI tax but threat of VAT rise lingers

Simon Quicke
Although the manner in which the coalition government is intending making cuts of £6bn this financial year remains slightly vague the expectations are growing that some taxes will have to increase to help cut the deficit.

Although business leaders have given the decision to scrap the national insurance increases on employers, announced yesterday by the Con-Lib coalition, there will be charges made on some employees.

"Small businesses did not want this tax on jobs because clearly it would have been a major barrier to staff retention and job creation and would have hindered economic recovery," said Forum of Private Business chief executive Phil Orford.

The BBC also revealed the results of a survey of leading economists had all bar a handful agreeing with the prediction that VAT will increase from the current 17.5% to 20% by next year.

The increase in VAT would raise £11.5bn a year but would reverse sharply the drop to 15% that was made last year to help consumer spending in the recession.

The Governor of the Bank of England Mervyn King gave his official backing for £6bn cuts yesterday saying it would be a positive indication to the markets that action was being taken to reduce the public debt, which was the most pressing issue facing the country.


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