Former chancellor backs government plans to slash VAT
Former chancellor Ken Clarke has said cutting VAT would be the “sensible thing to do” as the government prepares to implement new measures to revitalise the British economy.
Speaking to the BBC today, the Tory MP said: “I think coming out of the lockdown, sorting out the mess — including the recession after the coronavirus — is going to be even more difficult than going into it in the first place.”
He added that a short-term reduction in the VAT rate should be considered. “I would accept that. I think that might well be a sensible thing to do,” he said.
“But, again, as with furloughing, with a strict time limit, because one of the things we are going to have to do is raise some taxation to pay for the much more interventionist things… the government is going to have to do.”
It comes as current chancellor Rishi Sunak has begun drawing up plans with the Treasury to slash VAT for a temporary period and to implement specific reductions in the rate for some sectors in a bid to boost the British economy following months of lockdown.
The tax reduction could come as early as July, the Financial Times reported, as the government prepares to outline plans to scrap the two-metre social distancing rule in favour of new “one-metre plus” guidelines.
Helen Dickinson, chief executive of the British Retail Consortium, said that cutting VAT and income tax for low earners “would boost consumer demand and raise consumption”.
Meanwhile, Kate Nicholls, chief executive of UKHospitality, urged the government to introduce a “big, bold intervention” to revitalise ailing sectors.
It comes as fellow former Labour chancellor Lord Alistair Darling today voiced his support for a temporary reduction of the VAT rate from 20 per cent to 15 per cent to urge customers to hit the high streets. Darling implemented a similar strategy in the wake of the 2008 financial crisis, cutting the VAT rate from 17.5 per cent to 15 per cent for 13 months to lift the UK out of the depths of the recession.
Ex-chancellor Sajid Javid yesterday said he would support a one-year cut in the top rate of VAT to 17 per cent to revitalise the economy post-lockdown, but warned that the plan would cost the exchequer upwards of £21bn.
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