German government attacks VAT plan

Date: 11th December 2008

Germany's finance minister has attacked Prime Minister Gordon Brown's fiscal rescue plan, dismissing it as "crass Keynesianism".

Speaking to Newsweek, Peer Steinbrueck claimed that the UK's temporary 2.5 per cent reduction in VAT would do little to increase consumer spending.

The comments come in the wake of Chancellor Alistair's Darling pre-budget announcement at the end of November, when it was announced that VAT would be cut from 17.5 per cent to 15 per cent for a period of 13 months.

Mr Steinbrueck told Newsweek: "All this will do is raise Britain's debt to a level that will take a whole generation to work off.

"The switch from the decades of supply-side politics all the way to a crass Keynesianism is breathtaking."

He added that "the Great Rescue Plan" for the financial crisis "doesn't exist" and predicted that 2009 would be a very challenging year.

Earlier in the week, Conservative leader David Cameron pledged to reduce public spending and scrap planned taxation hikes should his party win the next general election.