The average household shopping bill is about £5,200 a year based on British Retail Consortium data, extrapolated from here.
Most, but not all food is VAT zero rate. Let's suppose this food bill has 80% zero rate items (based on a quick check of my family's almost exactly national average spend this week I'd think that understated). That means that £4,020 of the average bill is zero rate.
So if the Institute for Fiscal Studies get their way and VAT at standard rate is imposed on all food then the average household shopping bill will rise by £700 a year.
The disposable household income in the UK of the 3rd quintile (median) group is £22,700 a year.
This group are not in the bottom 30% of income earners: the group that the IFS suggests should be compensated in full for imposing VAT at 17.5% on all goods and services, so their income would not change as a result of the change in tax policy the IFS recommends.
As a result these ordinary people, on what are already extraordinarily tight budgets would be at least 3.1% worse off on their food budget alone each year.
On the other hand for the top decile average disposable income is £56,110 a year. So for them the increase of £700 is just 1.2%.
And no one, not even the IFS, could argue in that case that the impact is anything but regressive.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
[…] have estimated that VAT increases on food will cost £700 a year, on fuel at least £150 a year and children’s clothing £100 a year. In median […]
[…] already shown in my blogs, and the IFS have now admitted that their proposal that VAT be applied to all goods and services at […]
[…] curious to note in the light of recent discussion here that Jersey is planning, according to TaxNews.com, to change its newly introduced goods and […]
[…] a year which works out at £23.80 a week. So, £212.68 – £23.80 = £188.88 left According to this – Tax Research UK / Average food bill to rise by £13.46 a week if IFS have their way the average food shopping bill is £5200 a year – let’s say £5000, that’s £96 a week. So that’s […]