UNION chiefs in the region have slammed the Government’s VAT increase, saying it will hurt the most vulnerable in society.

Effective from midnight last night, VAT has risen from 17.5 per cent to 20 per cent.

The Northern TUC argued that this increase, which they describe as regressive, will hurt those on modest and low incomes the most.

Neil Foster, the Northern TUC’s policy and campaigns’ officer, said: “The 20 per cent rise will be a disaster for workers in the public and private sector across the North- East, many of whom are currently facing a pay freeze.

“The VAT rise is going to make so many day-to-day essentials more expensive.

“For people on fixed incomes such as pensioners they will notice it even more.

“Ministers should not be taking money off the most vulnerable when some genuine luxury goods such as antiques, helicopters and private education still remain VAT exempt.”

But James Wharton, Conservative MP for Stockton South, said that the concept of VAT being a regressive tax is a myth and critics of the increase should come up with a viable alternative.

“The deficit needs to be tackled and that needs to be done by cutting spending and raising certain taxes,” said Mr Wharton. VAT is in many ways a progressive tax, if you have more money you will no doubt buy more items which will incur VAT.

“Food, clothing and most essentials do not fall under the threshold of VAT.

“If you’re going out buying new TVs and new cars, then of course you will be affected.

“Nobody wants to see taxes go up, least of all the Conservatives, but this is the situation we have been left with by the previous government. We have a deficit we need to tackle.”

The TUC has also expressed concern that the rise in VAT will undermine consumer confidence in the economy.

Mr Foster said: “At a time when the economy is far from secure, it is a reckless gamble by the Government to make the majority of goods and services more expensive.”

The rise will have a bigger impact on small businesses than big retail firms, said Colin Wilkes, director of the Durham Markets’ Company, which owns the indoor market in Durham City.

The market is home to about 50 independent traders selling a wide range of goods.

Mr Wilkes said: “Undoubtedly from the smaller traders’ point of view, it is a considerable blow that they will be hit and they will find it particularly difficult to cope. It will be another increase in costs that they will have to take into account when they trade.”

Mr Wilkes’ firm was helping traders by delaying increasing rents for three months.