Britain Heading for a Double-Dip Recession

According to the splash in The Times today, both of Britain’s main parties — Labour and the Conservatives — are planning after the spring general election to raise sales tax from 17.5 percent to 20 percent, part of the desperate effort to start putting the country’s books in order.  And what will be the effect? Almost certainly to put the country into a double-dip recession.

Both parties are also talking about hiking income tax. January has seen a retail collapse — Britons just are not buying. And with a jump in VAT, retailers will have an even more torrid time. They are facing already in the spring a jump in business rates.

As I blogged back in September, both of the UK’s main parties seem oblivious to one of the key lessons of the Great Depression: federal and state tax hikes and currency devaluation prolonged the depression and pushed the US back into a second slump in 1937.

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