Chancellor Rishi Sunak is reportedly considering cutting VAT in order to help stimulate the economy but could follow the move up with a set of Autumn tax rises.
According to the Financial Times, Sunak is planning deferred tax rises and cuts to public spending in his autumn Budget as a follow up to further stimulus for the economy to be announced in the coming weeks.
Reports suggest that the Sunak may take a similar tack to that of former chancellor Alistair Darling following the 2008 stock crash reducing VAT from 20% to 17% or 15%.
According to sources close to the chancellor cited by the Financial Times, an alternative being considered is a lower VAT rate for the tourism sector — including pubs, restaurants and hotels — is one option being discussed.
It is suggested that any actions to lower VAT rates or other taxes would only come after the government loosens social-distancing rules.
The move to boost consumer spending comes after GfK’s Consumer Confidence Index revealed that consumer confidence had increased by six points to -30 in June.
The measure for the general economic situation of the country during the last 12 months has improved by one point to -59, but is still 27 points lower than in June 2019.
Expectations for the general economic situation over the coming 12 months were also up by nine points to -48 points.
Additionally, the Major Purchase Index increased nine points to -32 in June, 30 points lower than the same period last year.