2011: a bad joke?

Add together today’s VAT increase and the new year fuel-duty rise, and you get a further 3.5p to the cost of a litre of petrol and diesel. That’s going to hurt fleet companies, in particular, where it hurts and could spark strike action in the UK.

UK petrol car owners are now spending a combined total of £10m a day more on fuel than a year ago, while diesel currently costs, on average, 128.35ppl – just 5p below its record high of July 2008. Organisers of the fuel strikes in 2000 (which cost the economy almost £1bn) have warned similar protest action could be on the cards in 2011.

“The impact of such strikes will resonate across the entire UK economy – the price of fuel doesn’t just hit British hauliers, it also hits UK competitiveness and raises the price of everything we buy in the shops,” warns Jakes de Kock, a director at Fuelcard Company. “The rise in fuel cost will see the price of everyday goods rise steeply, fresh food become scarce and many jobs could be lost. The UK could come to a total standstill.”

Entrepreneurs have returned to work today with a heavy heart. More than 70 per cent of small businesses expect today’s VAT rise to have a negative impact on their business, according to a member survey by Federation of Small Businesses (FSB). More than half the respondents said they expect to increase prices, 45 per cent expect a fall in turnover, and 36 per cent expect a loss of customers as a result. (Read the entrepreneur backlash here.)

Even though George Osborne has said the VAT rise is the “least damaging” solution for tackling the deficit, Ed Miliband says the measure could lead to 250,000 job losses.

The FSB is calling on the government to increase the threshold at which companies begin to pay VAT, from the current rate of £70,000 to £90,000. And we’re backing the plea.

Oh, and before you hurl your computer screen across the office, don’t forget there’s a one per cent increase in National Insurance in April.

Ouch.

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