THE increase of VAT from 17.5 per cent to 20 per cent today will mean destitution for millions of unemployed and low paid workers and their families.
The cost of this increase for an average family is estimated to be an extra £7.50 a week which equals £390 a year – more than enough to tip hundreds of thousands of families already living on the edge into acute poverty.
Petrol prices are already set to rise by 3.5 pence a litre with the VAT rise on top.
Such a massive price hike can only drive up the cost of every single commodity that needs to be transported.
The cost of food, which is zero rated for VAT, will inevitably be driven up by increased transport costs.
While economic forecasters are predicting Consumer Prices Index (CPI) inflation rising to 3.5 per cent, it is clear that the VAT increase – designed by the Tories to raise £13 billion towards bailing out the banks – will spell disaster for the low paid, pensioners and the unemployed.
In fact, since the VAT increase will lead to a fall in retail sales by £2.2 billion in the first quarter of 2011 it is obvious that a large number of retail firms are heading for bankruptcy.
The massive drop in consumer spending will result in 250,000 jobs being lost in the private sector.
So much for the Tory-LibDem coalition claim that jobs in the private sector would miraculously appear to absorb the hundreds of thousands of public sector jobs they are destroying.
All these predictions about the rate of inflation totally underestimate the real increases that are hitting the working and middle classes.
Energy bills are going up by 6 per cent, twice the rate of the CPI.
This translates into an extra £72 a year on gas and electricity.
On top of this we are only just about to feel the impact of the steep rise in commodity prices as they filter through into the price of goods in shops.
The price of cotton, wheat, sugar, soya and cooking oil are all at record highs.
A number of major retailers – including supermarkets – have boasted that customers will barely notice the VAT increase, that they will absorb them in a shower of ‘special offers’.
In fact, none of these companies will absorb the increases indefinitely, a fact acknowledged by the industry itself. Indeed, a survey carried out before Christmas by consumer organisations into the effect of the VAT rise found that 60 per cent of retailers and product managers planned to smuggle in extra price rises above the 2.5 per cent increase.
There is a very small limit to capitalist benevolence and a very strong impulse to screw as much profit out of the working class as possible.
At a time when workers and their families are facing real cuts in their wages through wage freezes and below inflation pay rises, and when the unemployed face massive cuts in benefits, these increases will place an intolerable burden on them.
The dilemma of whether to pay the rent or feed the children is going to become a very real issue for millions.
While workers and their families face the prospect of going without food and shelter, the bankers are naturally laughing because they are getting another £13 billion towards propping up a system that is so bankrupt historically that it cannot provide for the very basics of human life.
The response of the Labour Party has been instructive.
Shadow Chancellor, Alan Johnson, wrote to George Osborne before Christmas asking him to ‘reconsider’ the increase.
In fact, it is not a question of asking the coalition to reconsider anything – it is a question of kicking them out and replacing them with a workers government.