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VAT increase sparks spending surge

By Channel 4 News

Updated on 29 December 2009

Christmas shopping in Britain is expected to top £22bn but the bonanza could be cut short when VAT is increased on Friday.

Post-Christmas shoppers

The Chancellor Alistair Darling cut value added tax from 17.5 per cent to 15 per cent in 2008 as part of a package of measures aimed at stimulating spending to fight the recession.

But VAT will return to 17.5 per cent on New Year's Day, adding an extra 22p of tax to every £10 spent on eligible goods.

The increase has got many retailers worried and some say they will delay the rise till February.

Others have decided to impose it on some goods, and not on others.

At Tesco, the prices of some products will go up  on January 1 but the price of many promotional items will remain frozen.

Boots is not planning a blanket increase, but will gradually review its prices instead.

At Marks and Spencer, the prices of general merchandise like clothing and gifts will reflect the VAT increase but food products will not until January 11.

At Topshop, the company will absorb the VAT increase so customers will not have to pay and Dixons say they will not be be revealing their plans until New Year's Eve.

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