The analysis, carried out the Centre for Economics and Business Research, quantified the economic impact of a range of possible VAT increases and National Insurance increases.
It concluded that a VAT rate of 20% would reduce the country’s budget deficit by £11.3bn within a year, but the cost would be 30,000 fewer jobs in the UK.
The analysis also revealed a 19% VAT rate would cost 99,000 jobs over four years while a 22.5% rate would mean 317,000 fewer jobs over the same period.
The BRC also warned of job losses if the government increased employees’ National Insurance contributions by 1% and employers’ by 0.5%. This could reduce UK job numbers by 25,000 in the first year.
The BRC is calling on the government to honour its pledge that public spending cuts will be prioritised over tax rises.
“The budget deficit is serious and has to be tackled but proposals must be judged against the implications for jobs and growth revealed by this new information,” said BRC director general Stephen Robertson.
“Business growth will get the country out of the hole it’s in, led by retail. The government must now deliver a route to stability that supports companies and customers by avoiding damaging tax rises.”
Retailers braced for VAT hike (13 May 2010)
FPB hails Cameron-Clegg coalition deal (12 May 2010)
January sales ‘awful’ due to weather and VAT (9 February 2010)
No VAT reprieve for retailers in pre-Budget report (9 December 2009)