One Bank of England interest rate policymaker said he expected CPI to hit 4% next year due to the VAT increase, and that interest rates needed to rise.

In an interview with the BBC, Andrew Sentance said he favoured a gradual raising of rates.

Mr Sentance is the only member of the Bank's Monetary Policy Committee to have recently voted for rates to rise from their current record low of 0.5%.

"I think the worry I would have is if we don't begin to move interest rates up gradually now, we will find further down the track that we actually have to move them up more sharply," he told BBC Radio 4's World At One programme.

http://www.bbc.co.uk/news/business-11989353

And of course, everybody's wages will rise accordingly. Won't they?

Can you imagine the numbers of people who are already struggling to pay their mortgages with interest rates as low as they are? The problem is that inflation will climb in the new year as a result of the VAT rise, though I suspect that shops will probably have a tough new year. Wages for many will fail to keep pace and that will lead to further financial problems in the future.