Daily Archives: November 23, 2008

Jim Pickard

The Treasury refused to comment on rumours swirling around Westminster yesterday that a big (temporary) cut in VAT would be the centrepiece of Monday’s pre-Budget report. 

The Sunday Times is tomorrow writing that there will indeed be a 2.5 per cent cut from 17.5 per cent to 15 per cent: the EU lower limit.

Such a move should appeal to the Labour heartland, given that VAT is a regressive tax which hits the poor harder than the rich. It also has the benefit that it can be implemented straight away.  

It would not be cheap, however: as much as £12.5bn, according to reports. It may have to be lifted to 20 per cent in a few year’s time (that is one theory anyhow). And would the move be enough to stimulate the economy? Read more