Reeves warned hike in VAT would have ‘serious impact’

RAISING VAT would have a serious impact on the economy, top economists have warned Rachel Reeves.

- By Simon Hunt

The Chancellor is weighing which taxes to increase in next month’s Budget to plug a £30bn hole in the public purse.

A rise in the sales levy would have the biggest negative impact of any major tax hike with a 0.9% fall in GDP in the first year, according to analysis by the National Institute of Economic and Social Research.

Higher VAT would also push up inflation, interest rates and unemployment far more than other taxes, damaging consumer spending.

A corporation tax rise would be the second-worst damaging option, experts said, and would likely lead to a 0.2% GDP hit.