Balls: cut VAT to get growth
SHADOW chancellor Ed Balls has said that a temporary cut in VAT would be the best way to stimulate growth but has not said how he would pay for the measure.
He said: “The VAT cut is the fastest and fairest way to do a temporary boost to demand, to get confidence moving.”
Balls said Labour would prefer to spend money on a VAT cut than on further cuts to corporation tax, saying that falling consumer demand is the top reason for the lack of economic growth.
“You’ve got families under real pressure with their living standards falling, hit hard by a VAT rise which is hitting them for £450 a year. That is why confidence is down, unemployment is rising, businesses aren’t investing,” he said.
By contrast, Balls added: “Nobody thinks a cut in corporation tax now is going to get families spending and businesses investing. They have had a corporation tax cut and they are not investing at the moment.”
Recent inflation figures in which last year’s 2.5 per cent VAT rise fell out of the comparison suggest that the tax hike had a significant impact on spending power. The rate at which the consumer price index is rising slowed from 4.2 per cent to 3.6 per cent in January this year.
But Balls came under fire from Conservative MPs, who said that a VAT cut would cost the public purse £12bn.
Balls also reiterated his call for the government to reintroduce Labour’s bonus tax, claiming it would raise £2bn per year that he would use to create jobs for young unemployed people.