‘The VAT increase to 20 per cent, price rises and low wages are the ingredients for a disaster in the making for millions of workers, the elderly and vulnerable people,’ warned GMB trade union national officer Sharon Holder yesterday.
She added: ‘Price rises have already started, they are being masked by companies’ claims that it’s the VAT.
‘Fares have gone up way beyond inflation and we’ve seen over 100,000 sacking notices sent out by local councils, and there is more to come.
‘The trade unions are looking at ways we can work with communities on defending public services – to get the government to realise that we should not have to pay for a situation that has been caused by the bankers.’
TUC General Secretary Brendan Barber said: ‘The VAT hike could not come at a worse time.
‘Consumers will be hit, with poorer households losing out most, and inflationary pressure will build at a time when pay settlements are already trailing behind the rising cost of living.
‘If it also prompts an early rise in interest rates, people will face a triple whammy income squeeze in 2011.’
Labour Party leader Ed Miliband warned: ‘At midnight VAT goes up, hitting people’s living standards, small businesses and jobs.
‘The VAT rise is the most visible example of what we mean when we say the government is going too far and too fast, because it’s clear that it will slow growth and hit jobs.’
He added that the average family would have to find an extra £7.50 ‘each and every week’, adding up to an extra £389 a year.
Accountancy group KPMG yesterday warned that 60 per cent of retailers and consumer product manufacturers have planned to increase their prices over and above the VAT rise to 20 per cent from 17.5 per cent.
Following a survey of 200 senior managers, KPMG added that across all industries, 40 per cent of UK firms planned to do the same.
Martin Scott, partner at KPMG Performance & Technology, said that as many retailers and consumer goods manufacturers had needed to discount intensively in recent years to win over wary consumers, and the intention to now raise prices was ‘an understandable reaction’.
But he warned: ‘In today’s price-sensitive market, any increases may well have a damaging effect on sales volumes. Firms need to understand the overall impact on profitability.’
In his New Year message, CBI Director-General Richard Lambert warned: ‘There are bumpy times ahead for businesses in Britain.’
He added that ‘the economic and political outlook both seem volatile over the short term.
‘For a start, the pace of economic recovery could slow quite markedly in the first few months of 2011.
‘The VAT increase will be taking effect, and the construction sector will start to feel the pain of public spending cuts.’
He concluded that ‘the quarterly growth rate in the next three months could be down to as little as 0.2 per cent, compared with 0.7 per cent in the third quarter of 2010.’
Young Socialists National Secretary Joshua Ogunleye said: ‘It is clear that both employers and the government are waging an all-out war on workers and youth.
‘It is not a case of getting this government to change its policies but, as we demanded on our March for Jobs and Free State Education, mobilising the might of the working class in a general strike to bring down the coalition and go forward to a workers government and socialism.’
