Brown and Darling slash VAT in £18bn tax gamble
First cut in the tax for 34 years leads Government's measures to stimulate spending. At a cost of £13bn, says Treasury, it could save the high street.
AT will be reduced from 17.5 per cent as early as this week as Gordon Brown and Alistair Darling gamble £18bn on a Christmas tax-cutting plan to rescue Britain from recession.
In a pre-Budget report (PBR) tomorrow loaded with huge political significance for the Prime Minister and the Chancellor, VAT will be cut – for the first time in 34 years – within days, in time for the first big Christmas shopping weekend.
The cut will be at least 2 per cent, possibly to 15 per cent, where it will remain for a "holiday" of one-and-a-half to two years, bringing some relief for millions of families as the economic downturn worsens.
This would take £10 off the average Christmas present bill of £384 and bring welcome respite to the beleaguered high street, where stores have been forced to bring forward the season's sales to get people spending.
Although the PBR could be subject to last-minute changes, a Treasury source said: "This is a quick way to get people spending." Yet it could come too late for Woolworths, as crisis talks begin today to rescue the chain and tens of thousands of jobs.
Reducing the VAT rate to 15 per cent would cost around £13bn, leaving around £5bn for other tax-cutting measures. Mr Darling is likely to announce raising income tax thresholds to help the poorest families who were hit by the abolition of the 10p tax rate.
