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		</div><p><a href="http://londonglossy.com/wp-content/uploads/2011/01/vat-rate-rises-from-175-to-20.jpg"><img class="alignnone size-full" title="Chancellor George Osborne said the VAT increase was 'a powerful weapon to tackle debt'" src="http://londonglossy.com/wp-content/uploads/2011/01/min-vat-rate-rises-from-175-to-20.jpg" alt="Chancellor George Osborne said the VAT increase was 'a powerful weapon to tackle debt'"/></a></p>
<p>The standard rate of VAT has increased from 17.5% to 20%, in a move designed to raise £13 billion a year to help balance the nation&#8217;s public finances.</p>
<p>Retailers have warned that the 2.5% hike will depress consumer spending in the high streets, while there are also fears it will fuel inflation and put upward pressure on pay settlements.</p>
<p>Labour leader Ed Miliband on Monday branded it &#8220;the wrong tax at the wrong time&#8221;.</p>
<p>But Chancellor George Osborne defended the hike &#8211; announced in his emergency Budget in June 2010 &#8211; as &#8220;a powerful weapon to tackle debt&#8221; and challenged Labour to say what cuts it would make to cover the cost of scrapping it.</p>
<p>Mr Osborne has previously said that the 20% rate is &#8220;not temporary&#8221; but a structural part of the tax system, leading economists to predict it will remain at least until the next general election, scheduled for 2015.</p>
<p>The rise is the second VAT increase in a year, after Labour chancellor Alistair Darling restored the 17.5% rate last January having temporarily reduced it to 15% for 13 months to stimulate the economy during the recession.</p>
<p>The change affects any VAT-registered business that sells or purchases goods or services that are subject to the standard rate. Most foodstuffs, children&#8217;s clothing and books remain zero-rated and reduced rates remain on items such as children&#8217;s car seats and supplies of domestic fuel and power.</p>
<p>Online shopping group Kelkoo said the change would increase the price of a litre of petrol from £1.19 to £1.22, a digital camera from £131 to £133.79 and a Ford Focus car from £15,195 to £15,518.</p>
<p>The British Beer &#038; Pub Association said it would add 6p to the cost of a pint of beer, pushing it through the £3 barrier for the first time.</p>
<p>Many shoppers are believed to have beaten the rise by buying big-ticket items in the New Year sales over the past few days before the new rate came into effect. A report by the Centre for Retail Research suggested consumers will spend an average of £324 less in the remainder of this year as a result, cutting UK retail sales by as much as £2.2 billion in the first quarter of 2011 alone.</p>
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