The UK is “skint” and the next Government could be forced to raise VAT beyond 17.5pc as it sets about “refilling the coffers”, Sir Stuart Rose, the executive chairman of Marks & Spencer, has warned.
He said that VAT – which is set to rise from 15pc to 17.5pc on January 1 – could be increased again next year as whichever party wins the general election looks to balance the national accounts.
“We are skint as a country and the Treasury needs revenue so I would not rule it out,” he said. Sir Stuart added: “this Government and the future Government have got to make some hard decisions about refilling the coffers”.
His comments on possible tax increases were echoed by Simon Wolfson, the chief executive of Next, the clothing chain.
Mr Wolfson said: “If you look at the UK’s structural deficit, which is £80bn , then you have got to conclude that all taxes will have to go up. The only real cure is time.”
Both M&S and Next released sales figures on Wednesday.
M&S reported better-than-expected interim results. Pretax profit increased slightly from £297.8m to £298.3m, however the figure was 4pc higher than analysts were expecting. Like-for-like sales at the chain fell by 0.9pc and total sales rose by 2.8pc to £4.3bn.
Despite the better-than-expected performance, Sir Stuart warned that the UK’s crawl out of recession would take some time.
He said that although consumer confidence had returned in recent months, it was only back to January 2008 levels. He added that a lot of “bad news” was set to hit the consumer economy in the coming months, such as the end of stamp duty relief on December 31, tax increases, the January 1 VAT rise and political uncertainty in the run-up to the election.
He said that the recovery will be “long and steady” and warned that it could be at least 12 months before the consumer economy started growing again.
“It might be 2011 before we start seeing some growth,” said Sir Stuart, before adding that a so-called 'double-dip’ recovery – a slight recovery followed by another downturn – could be “very demoralising”.
M&S said that like-for-like clothing sales fell by 1.4pc over the half, while food sales fell by 0.3pc. The retailer also reported that it had cut food prices heavily over the half.
Sales from its website grew by 29pc over the half. However M&S has attracted controversy for including sales made over the internet in its 'like-for-like’ figure, which is generally a measure of sales from physical shops. Yesterday Next pointed out that using this same metric, its 'like-for-like’ sales would be higher than they appear.
M&S will launch its new Christmas TV ad campaign next Wednesday. The £10m campaign will consist of nine different ads, which will star celebrities including Stephen Fry, John Sergeant, Life on Mars actor Philip Glenister as well as Wallace and Gromit, the Plasticine characters.
M&S cut its interim dividend from 8.3p to 5.5p. Shares in the retailer rose 20.5 to 361.5p. M&S’s pension liability increased by £1bn but this was offset by a £700m increase in the market value of certain assets.
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