The Government will today (November 24) unveil plans to cut VAT to its lowest level in nearly 20 years in a bid to kickstart the economy. It is thought that the Government will slash the rate of VAT from 17.5% to 15% in a bid to encourage consumers to keep spending.
The proposal are understood to have been met with a lukewarm reaction from retailers, suggesting that the cut will make only a marginal difference and that customers will struggle to work out its effect on store prices.
The high street has already seen unprecedented discounts on goods and services in the run-up to Christmas, with retailers including Marks & Spencer holding a one-day 20% off event and Debenhams offering up to 25% off everything over three days in a bid to lure customers to their stores. Others chains are already holding mid-season sales.
A British Retail Consortium spokesman welcomes the proposed cut but stresses it must last “at least one year” to work.
The Government hopes to pay for the cut in VAT with an increase on the top-level income tax following the next election in measures to be announced in the pre-Budget report.