The British Retail Consortium has called on the coalition government to focus on spending cuts over tax rises, amid fears that retailers could be hit by a rise in VAT.
In its emergency budget submission, the trade association said it supported the proposed 4:1 ratio of spending cuts to tax increases as Whitehall bids to bring the budget deficit under control.
The BRC urged Whitehall spending chiefs to show caution over raising taxes and said plans to halve the deficit over the next four years - rather than the three years currently proposed - would allow for the strongest economic growth in the long term.
The submission comes with the government reportedly considering a hike in VAT from 17.5% to 20% - prompting the BRC to call for a freeze.
“The BRC is extremely concerned that an increase in VAT would have adverse long-term implications for both the sector and the wider economy,” the body said in its submission.
“We are opposed to any increase in the standard rate of VAT [and to] an extension in the scope of VAT to include zero-rated items, such as food and non-alcoholic drink, books and children’s clothing, which would have a significant impact on working families.
“In particular, it would have a disproportionate impact on the poorest members of society, who spend a higher proportion of their incomes on these essential items.”
Stephen Robertson (pictured), director general of the BRC, added: “The sheer size of the deficit means action must be taken, but the response mustn’t harm the fragile recovery.”
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