War of words as chancellor claims VAT increase will hit rich hardest

BRITISH Chancellor George Osborne has been accused of treating people “like fools” by claiming yesterday’s VAT hike will hit the rich hardest.

Labour levelled the charge after Mr Osborne said the increase from 17.5% to 20% was tough but necessary and more progressive than alternatives. He also signalled that there were no plans to reverse the rise with income tax likely to be targeted for any possible reductions in future.

The VAT change, announced in last year’s budget, is designed to raise £13 billion (€15.3bn) a year to help tackle the deficit. But there are also fears it will depress consumer spending as fuel and other costs rise, as well as driving up inflation further.