It’s Time to Cut VAT to Bolster Demand
The news that inflation has risen to 2.9% has reinforced the case for a temporary reduction in VAT, according to the Scottish Chambers of Commerce.
Liz Cameron, Chief Executive of Scottish Chambers of Commerce, said:
“This week we have learned that household spending has fallen for the first time in four years, which comes as no surprise given continued high inflation, which has been outpacing increases in earnings. This is an early warning sign that there is a real threat to our economy from a decline in consumer spending power.
“Although the political situation at Westminster has not yet fully settled down following last week’s General Election, the continued elevated rate of inflation above the Government target of 2% calls for urgent action to address the impact this is having on businesses and consumers.
“At the time of the financial crisis and recession in 2008-09, the UK Government reduced VAT on a temporary basis in order to bolster consumer demand and it is time that such a move was considered again to give people the confidence to spend and to reduce the pressures on business margins. Everything possible must be done to maintain consumer confidence in these uncertain times to provide a route to business growth and economic prosperity.”