VAT cut an expensive mistake, say Lib Dems

12.30.00pm BST (GMT +0100) Thu 27th Aug 2009

Liberal Democrats have highlighted a survey carried out by PricewaterhouseCoopers which has found that 88% of people surveyed have not increased their spending on goods and services as a result of the Government's decision to cut VAT by 2.5% until the end of the year. Only 8% said it had boosted their spending.

The £12bn move was introduced by the Chancellor, Alistair Darling, as a "panic measure" to address plummeting confidence in the economy, but was criticised at the time by Lib Dem Shadow Chancellor Vince Cable as being hopelessly ineffective.

Lib Dem spokesman for Newcastle East Greg Stone said "The Lib Dems believe that the Government should have targeted income tax and not VAT, by raising the income tax threshold to £10,000 to take people on lower incomes out of tax. This would provide real and meaningful help to hard-pressed families by means of a £700 tax cut for most households, helping to improve consumer spending."

"This ineffectual VAT cut is costing the country £1bn a month. Lib Dems believe that ministers should scrap it immediately and spend the money on transport and environmental projects which would boost the economy, create new jobs and leave a lasting green legacy for Britain."