Oral question asked in the House of Lords, by Baroness Kingsmill (Labour). It was answered on Wednesday, 19 January 2011.

Inflation

Question: My Lords, what impact on inflation does the Minister think the recent increase in VAT will have?

Answer: My Lords, first, the recent relatively high levels of inflation reflect, among other things, the previous Government returning the rate of VAT to 17.5 per cent, so that number is included and it is one of the factors behind the rise in inflation in December. As to the effect on inflation of the increase of the standard rate from 17.5 to 20 per cent, that depends on how much of the increase is passed on to consumers, and we will wait to see on that. However, because the rise to 17.5 per cent will come out of the inflation numbers, it will partially offset the effect of the increase that comes in in January.

Secondary information