Isle Of Man / Ellan Vannin

VAT hike to net island's treasury extra £25m

Manx government offices
Image caption The Treasury has welcomed the rise in VAT and hopes it will not affect trade

The rise in VAT in the UK is expected to generate "a welcome boost" of an extra £25m for the Manx government.

The Treasury Minister, Anne Caine, said she hoped the hike of 2.5% - taking the tax to 20% - will not deter people from spending at the island's shops.

The extra revenue will "replenish the black hole" in the treasury following the downturn and redrawing of the VAT agreement with the UK.

A 2.5% rise came into effect as of midnight.

Labour Party Leader Ed Miliband has criticised the hike, saying it is the wrong time for such a move.

"They are cutting too far and too fast when they should be prioritising jobs and growth," he said.

'Necessary rise'

However, the Ms Caine said she did not think it would have "much of an effect".

"It is not all doom and gloom by any means, this will be welcomed in our quarters.

"When Labour decreased VAT by 2.5% it didn't have that much of an effect.

"So I don't think it will be too detrimental having an increase."

Business groups have warned that retailers will be hit by the increase, while opponents of the rise have said the poorest will be hit hardest.

The government said the rise was necessary to help bring down the UK's high budget deficit.

Food, children's clothing, newspapers and magazines are not subject to VAT.

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