On January 4, 2011, driving is going to get significantly more expensive in the United Kingdom. In a special budget speech in the British House of Commons this week, Chancellor (equivalent of finance minister or treasury secretary) George Osborne announced that the Value Added Tax (VAT) would increase from the current 17.5 percent to 20 percent in an effort to eliminate the budget deficit within five years. The increased tax is expected raise £13 billion per year, but that will only account for 23 percent of the reduction in the deficit with the rest coming from spending cuts.
The VAT is applied to almost all products in the UK except for items like food and children's clothes. The increase means that a £20,000 car will go up by an extra £500 next January. The cost of fuel will be going up as well. Prior to the election, the previous Labor government had announced two fuel tax increases totaling 1.76 pence per liter that take effect in October and January. The VAT on fuel is calculated
on top of the excise tax so the price will go up even more.
[Source: The Gaurdian
| Image: AP]