Are shoppers being duped by VAT price freeze?

Retailers accused of misleading customers over bargains

By Elliot Wright, 30th December 2009

Retailers claiming to be freezing prices ahead of the VAT rise on Friday have been accused of sneakily raising the price of thousands of goods over the past few weeks.

Several retailers - including Debenhams and Tesco - recently announced that they will not increase prices when VAT rises from 15% to 17.5% on January 1.

However, according to industry data leaked to the Daily Telegraph, at least one major retailer has been surreptitiously increasing prices over the last eight weeks leading up to the announcement of the price "freeze". This has prompted accusations that retailers may be ensuring they do not lose out through keeping current prices at the same level.

One example the Telegraph cites is Tesco's freeze on the price of Fairy non-biological at £4.50, however the data shows that the same product cost £4 in October. It is thought that Tesco has increased at least 500 prices over recent weeks.

Tesco is freezing the price of Fairy non-biological at £4.50, however the data shows that the same product cost £4 in October.

The data also revealed that Boots had increased prices across a range of over 1,500 products by about 2% in the last 12 weeks. While supermarket chain Morrisons raised 400 prices by 2% on products such as pet foot and cleaning products earlier this month.

Many retailers, including Top Shop, John Lewis and Argos, pledged that they will absorb the rise in VAT so any increase in price will not be passed on to customers - especially with shopping going into overdrive as the January sales begin. But the leaked data suggests that genuine savings will be hard to come by.

"There is some pre-VAT positioning going on here," said one retailer, who did not want to be named.

The accused retailers have been quick to deny that the price increases had anything to do with preparing for price "freezing".

A spokesman for Boots said to the Telegraph: "We are committed to offering great value to our customers. All retailers regularly review their prices in line with the market conditions and we have to take into account the effect of cost price changes including those impacted by currency movements."

A Tesco spokesman said that the price movements had "no link whatsoever" to the forthcoming VAT increase.

A spokesman for Morrisons said: "Throughout the year prices vary reflecting costs and promotional changes across the weekly shop, however at Morrisons we aim to offer great value for money across all product areas. For example, between October and December this year we have reduced the prices of over 700 health and beauty products."

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