Asda’s report comes on the day that Chancellor George Osborne is due to announce the Government’s Emergency Budget when he is expected to raise VAT to 20%.
Asda warns that its monthly income tracker, which measures family spending power, shows that the average UK family has £6 a week less disposable income this month than a year earlier., the biggest fall since the start of the year.
The supermarket says that 85% of its Asda Mums consumer panel fear that the expected increase in VAT to 20% will have the most marked effect on household spending and with 60% saying a rise in national insurance would also put pressure on finances.
Andy Clarke, Asda president and CEO, says: “The best businesses will view this as a call to action, not a time to wallow, whinge, or wonder when the recovery will appear, but a time to do what British business does best – find ingenious, sustainable ways to reduce costs so whatever tough measures are on the way, customers don’t notice a thing.”
The Chancellor’s budget is expected to include a raft of tough tax measures and spending cuts including a rise in capital gains tax, a freeze on council tax, a levy on bank profits, rises in cigarette and alcohol duties and changes to income tax.
The expected increase of VAT to 20% would raise an additional £12.5bn each year but some retail observers say that while an increase would cause a spike in sales as consumers bring forward purchases ahead of the increase, spending would then drop off.