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adding that the richest 85 people in the world own the same amount of wealth as the bottom half of the world's population.

"It leads to an economy of exclusion, and a wasteland of discarded potential," Lagarde said.

Overall the rise in VAT is likely to cause higher inflation, reduced GDP growth and some job losses in 2011 and into 2012 - so some deterioration in three microeconomic indicators at the expense of improved government finances. But in the long term a 20% VAT rate is unlikely to have any noticeable effect on UK competitiveness and growth. The long-term trend GDP is driven by supply side factors such as technological progress, working age population growth, improved work and enterprise incentives and the scale and quality of capital investment spending).