Quote Originally Posted by Martin View Post
Whilst you are condemning the Tories, any comments on why Denis Healey increased the rate of VAT to 25% on "luxury goods", which included refrigerators, back in 1974??

And as for the "low wage earners" - food, public transport, children's clothes etc are all VAT exempt, so there is no impact on essentials!

mb
Are gas and electricity not essential? Pretty hard to run the fridge without them!

Children's clothes don't carry VAT but adult clothes do. If you're a woman using tampons etc then they're pretty essential and you pay VAT on those (but note that this government reduced the rate from 17.5% to 5% in 2001)

Not all foods are VAT exempt; takeaway food carries VAT and many low income people eat a lot of such food.

The country was in a real mess in 1974 (we'd just had 3 day weeks, regular scheduled power cuts and so on) so some drastic measures were needed. Putting VAT at 25% on electrical items was not good but most people don't buy fridges regularly. Of course, if you needed one then it was a big increase in the price but it was a one-off hit rather than stuff you have to buy every day.

Healey also reduced the standard rate of VAT (ie the one which is paid on most VAT rated items) from 10% to 8% when the 25% rate was introduced. A couple of years later he dropped the top rate from 25% to 12.5% - leaving it to Margaret Thatcher's government to put everything at 15% just after she was elected.