YOU would think nobody would like the fact VAT has been increased to 20%, but you would be wrong.

The international money markets were delighted with the move, along with cuts to benefits, a public sector pay freeze and other money skimping measures introduced as part of George Osborne’s first Budget yesterday.

His speech forgot about the voters who brought the coalition to power just last month, and instead focused on the concerns of City traders and credit rating agency analysts.

These people were so impressed by Mr Osborne that sterling and UK gilts rose yesterday afternoon after the Chancellor sat down, satisfied that his measures were tough enough to tackle Britain’s public spending black hole.

Increasing VAT was a bold move that could raise big money for our cash-strapped Exchequer, but it could just as easily backfire if it induces consumers to defer spending. Any cut in high street spending could have a knock-on effect on economic growth forecasts for Britain. It will, at the very least, take billions of pounds of consumer spending power out of the economy.

By the standards of this country, a VAT rate of 20% looks uncomfortably high, but our longstanding 17.5% rate is one of the lowest in Europe. The new rate, to take effect in January, 2011, is more typical of rates in the rest of the EU.

And, if it’s not to be a VAT hike, how else would George Osborne raise the sort of cash needed? Something, somewhere has to give.

Speaking as one of the many millions of private sector employees who have already suffered a pay freeze, the measures to hold public sector pay static are also welcome. From the public sector worker’s point of view, frozen pay has to beat the alternative of more job cuts.

The new Chancellor had a tough job to do yesterday, by anybody’s standards. All in all, Mr Osborne’s performance was better than many anticipated. He delivered the bad news with a modicum of aplomb.