IN FEWER than 50 days, Britain’s new coalition government is expected to deliver an emergency budget aimed at bringing down the country’s extraordinary levels of debt.

According to a BBC survey of 28 independent economists, one of its first actions will be to increase VAT from 17.5% to 20% or even higher.

And that, for all the quiet satisfaction in the Channel Islands about David Cameron’s new team and its likely impact on the islands, is a very significant concern.

Perhaps of all the ‘tax dodges’ in which these Bailiwicks are supposed to indulge, shipping VAT-free packets to the UK is the most hated.

It is certainly the most visible and the most politicised.

No matter that HM Revenue and Customs acknowledges that collecting VAT on such items would cost more than the £80m. it might bring in, MPs of all parties are under pressure to stop it.

If VAT does rise to 20% or more, DVD and CD retailers in particular will cry foul even louder, supported by the Guardian, which regularly campaigns on the topic.

The facts, that most harm has been done to independent outlets by supermarkets like Tesco and that companies like HMV are increasingly sending items from here that are well above the £18 ‘loophole’ threshold, won’t come into it.

What the new coalition government makes of it remains to be seen and there is a chance common sense will prevail: low value consignment relief, as it is known, was brought in at the request of EU member states to save money and some actually want it increased to 100 euros.

In addition, having the industry on the UK’s doorstep means there are voluntary codes in place to restrict the trade while any attempt to stop it would simply see an immediate relocation to Switzerland, Hong Kong or other jurisdictions which are keen to have this business.

Nevertheless, 600 to 800 people are employed locally in the fulfilment sector and it underpins Guernsey Post and the island’s freight services.

Retaining it could become one of the biggest tests of the relationship between Guernsey and the new-look UK.