Chancellor announces VAT cut to 'stimulate growth'

Date: 25th November 2008

Chancellor Alistair Darling yesterday (November 24th) announced the cut in VAT as part of a wider raft of fiscal measures.

During his pre-budget address to parliament, the chancellor revealed that the rate of VAT would be reduced from 17.5 per cent to 15 per cent on a temporary basis.

The change will last for 13 months, starting next Monday, and is designed to boost consumer spending in a bid to re-energise a shrinking economy.

Mr Darling said: "This temporary reduction is the equivalent of the government giving back some £12.5 billion to consumers to boost the economy.

"It will make goods and services cheaper and - by encouraging spending - will help stimulate growth."

Also in the budget report, Mr Darling introduced a new 45p income taxation band for those earning more than £150,000 per annum; a change which shadow chancellor George Osborne derided as working to a "political cycle", due to its proposed introduction date of April 2011, after the next general election.