The UK government has said that reported plans to charge VAT on food as a means of reducing the national deficit were “not on the table”.
A report in the Sunday Telegraph yesterday (7 March) claimed the imposition of VAT on groceries was being actively considered by Whitehall officials to reduce public debt.
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However, a spokesperson for the Treasury told just-food today that the reports were “pure speculation”.
“It is not on the table,” a spokesperson for the Treasury said.
The spokesperson added that the Chancellor had other means of reducing the deficit, announced in his last pre-budget report.
“You only have to look at things like fuel duty, vehicle excise duty, there are things that have been announced that will go towards public finance. And alcohol duty is an important contributor too. Tax on food is a different matter and it just isn’t a goer.”
Richard Dodd, head of media and campaigns at the British Retail Consortium (BRC) said that, while the association acknowledged tax increases were “inevitable”, it was opposed to any extension on VAT to include food.
“Certainly we would be opposed to either the main rate of VAT increasing, and to increases in the scope of VAT. Extending VAT to include food would be a mistake because you would hit demand at a time when that is actually weak. It would put more pressure on hard-pressed households.”
Dodd said any tax on food would “significantly” fuel inflation and he added: “It would fall disproportionately on lower-income households because they spend a bigger proportion of their income on food”.
A tax of between 3% and 5% on food would raise billions of pounds and help reduce government borrowings, which it is understood are likely to hit GBP180bn this year.
Schools Secretary Ed Balls yesterday distanced Labour from the idea but accused the Conservatives of preparing to raise VAT and impose the tax on food if they win the General Election.
A spokesman for the Shadow Chancellor, however, said that it was “absolute nonsense” that the Conservatives had had discussions over a possible tax on food.
“Labour are the only people who have drawn up plans for a VAT increase and this is a desperate attempt by Ed Balls to distract attention from that.”
