Gloom as VAT rises bite in Norfolk

Families across the region are facing a grim New Year as increases in VAT and fuel duty stretch their budgets to the 'point of collapse'.

The year may have only just begun but households, already struggling to cope with rising living costs, will need to find up to �500 extra a year to meet the rate increases.

The VAT rise from 17.5pc to 20pc comes into force tomorrow, with petrol, food and phone bills expected to be the hardest hit.

But the 0.76p a litre hike in fuel duty, the third increase in less than a year, has been hitting drivers' wallets since Saturday, and has a significant effect in rural East Anglia.

Both increases come as figures show that one in 10 people are living beyond their means and the British Retail Consortium has warned of a year of inflation for consumers.

Tracie Horton, from the charity Home-start, which supports parents across Norfolk, said: 'Families have already been struggling to cope with the rise in oil prices pushing up the cost of utility and fuel bills.

'Some are also operating on a very tight budget as it is so the rises in VAT and fuel duty will be a double blow and push their budgets to the point of collapse.

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'There has been no respite for families over the last couple of years with costs constantly rising and wages being frozen and households have been making severe cut backs.

'It is also going to be a tough year ahead for families with parents not being able to afford to take their children on days out because these will be seen as luxuries that can go.'

The impact of the increases is also set to leave some of the region's elderly having to contemplate compromising on the bare essentials to survive.

Edith Pocock, president of the Norfolk and Norwich Pensioners Asssociation, said: 'Older people are just about managing at the moment but with both these increases we will all struggle to cope.

'There are a lot of elderly people living on a marginal sum, who don't have spare money and are living on only the bare essentials.

'How much more can we take before there will be a major tipping point? It's not just today's older people but the next generation of pensioners to come.

'We also have sympathy for our children and their families because it cannot be easy to raise a family with the cost of living always rising.'

Households will also be hit by a forgotten rise in Insurance Premium Tax — charged across all insurance products.

This will rise from 5pc to 6pc, adding �2.09 to the average buildings insurance policy and �1.11 to contents a year. Car insurance will also rise by more than �10.

Energy and water bills are exempt from the VAT rise but consumers are facing an uncertain year with four of the big six suppliers having already announced price hikes.

Ann Robinson, director of consumer policy at uSwitch.com, said: 'Following the joys of Christmas, people are going to be bought back to reality with a crash tomorrow as they see their bills go up.

'The good news is that there are ways to off-set this. The New Year's resolution on everyone's lips in 2011 should be to become more savvy and take better control of household finances.

'By ensuring you have the best deals available you could claw back almost �1,200 into your household budget.'

The value added tax was at 15pc more than a year ago after a temporary reduction designed by the then chancellor Alistair Darling to encourage consumers to spend more and boost the economy.

The 17.5 pc figure was restored on January 1, 2010 and will tomorrow move in line with the world average of 19pc and the European average of 20pc.