Consumers will vote with their feet on VAT rise, says Quidco

Press Release : March 23, 2010
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One in three consumers surveyed by Quidco* said they would cut their spending if VAT increased by just half of one per cent, and eight in ten would cut back if VAT rose as high as 20%. Nine in ten said a VAT rise of any size would leave them feeling financially worse off.

The headline rate of VAT returned to 17.5% in January, but there has been speculation that the Chancellor could announce an increase in the tax at next weeks Budget, to tackle the £178 billion deficit in Britains finances. Earlier this week Chief Secretary to the Treasury, Liam Byrne appeared to put a VAT increase back on the agenda when he refused to rule out new tax rises.

A half per cent increase in VAT would add just 43p to the cost of a £99 digital camera, assuming the retailer passed on the extra cost to the shopper. The same item would cost £2.11 more if VAT rose to 20%**.

Four in ten consumers told Quidco they would buy fewer groceries if a 1% tax were added to their cost, rising to 7 in 10 people if a tax of 3% were imposed. A 1% tax would add around 51p to the cost of a weekly shop for the average household, with 3% adding £1.53***.

Nicola Frame from Quidco says:
The recession may officially be over, but household budgets are still stretched and the last thing people need is for the price of their shopping to go up. Consumers are now much more savvy about how they shop, which means theyre looking for great value on every purchase and theyre prepared to walk away altogether if the price isnt right.

END

Notes to editors

* Survey of 1,002 Quidco members, March 2010
** Prices would be affected as follows, if the retailer passed a tax increase on to the consumer:

Nikon Coolpix S3000 digital camera from Jessops
Price now VAT 17.5% £99.00
VAT at 18% £99.42
VAT at 20% £101.11

iPod Classic from Apple Store
Price now VAT 17.5% £193.00
VAT at 18% £193.82
VAT at 20% £197.11

Samsung 32inch LCD TV from Comet
Price now VAT 17.5% £339.99
VAT at 18% £341.44
VAT at 20% £347.22

*** Living Costs and Food Survey 2009 by the Office for National Statistics found that the average UK household spent £51 per week on food and non-alcoholic drinks. Prices would be affected as follows, if the retailer passed a tax increase on to the consumer:

Average weekly grocery shop £51
VAT at 1% £51.51
VAT at 3% £52.53

£75 grocery shop
VAT at 1% £75.75
VAT at 3% £77.25

£100 grocery shop
VAT at 1% £101.00
VAT at 3% £103.00

Case studies are available.

About Quidco

Quidco is the easy way for people to save money on every purchase. It pays cashback when people click through and make a purchase at any of the 1,900 retailers listed on its website, by paying 100% of the commission it gets from the retailer, directly into the shoppers bank account. Members pay an annual fee of £5 which funds the site.

Quidco was founded in 2005 with a mission to help people save money and is the UKs leading cashback website (Source: Hitwise Jan 2010). The site is free to join and currently has more than 780,000 members who will save a total of £35m this year.

Notes to editors

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