Lib Dems propose VAT cut to save families £600 each 

The Woking Lib Dems have demanded an emergency cut to VAT to protect local families from soaring bills and the Conservatives' worsening cost of living crisis.

The Lib Dems are calling for the standard rate of VAT to be reduced from 20% to 17.5% for one year, a move that would save households in Woking an average of around £600 each. This would mean putting around £22,560,000 back in the pockets of 37,600 families in Woking.

The plans were set out by Lib Dem Leader Ed Davey at the party's Spring Conference this weekend and have been backed by Lib Dem Spokesperson for Woking, Will Forster, and other local Lib Dems.

It comes amid warnings that the war in Ukraine will worsen the cost of living pressures facing households, with energy, food and fuel bills all expected to rise. Inflation is also forecast to reach 8% in April, its highest level in decades.

The Lib Dem plans would support the economy by boosting spending at local high streets. The proposals would also be expected to keep inflation down by making the prices of everyday items lower than they would have been.

The emergency change to VAT could be introduced quickly and easily by the Chancellor for one year. Woking's Lib Dems have said he should use the Spring Statement coming up on March 23rd to bring forward the change as well as scrapping the Conservative's National Insurance tax hike, to bring much-needed respite to local families.

Lib Dem Spokesperson for Woking, Councillor Will Forster, said:

"The Conservative cost of living crisis is hitting families hard and it is about to get worse. People across our community are worried about how to make ends meet as bills go through the roof."

"An emergency cut to VAT would offer a massive boost to people in Woking feeling the pinch by putting over £22.5 million back into their pockets. It would also support our treasured shops, cafes and restaurants by boosting spending on the high street."

"This is crunch time for the Chancellor and the Conservatives. Will they act or just inflict more financial pain on families by clobbering them with another unfair tax hike?"

Lib Dem Leader Ed Davey added:

"This is a once-in-a-generation crisis, and the Government must step up to help struggling households and businesses on the brink. Instead of clobbering struggling families with a tax hike, the Chancellor should be putting money back into their pockets."

ENDS

Notes to Editor

The Lib Dems are calling for the standard rate of VAT to be reduced from 20% to 17.5% for one year. The party's analysis suggests this would save households around £600 on average. Full figures on estimated savings by local authority and constituency are available here: VAT cut benefit by LA

Cutting VAT would help the retail industry, giving a much-needed boost to local high streets and increasing economic growth. A similar VAT cut in 2008 was found to boost retail sales by about 1%, increasing aggregate expenditure by around 0.4%: Using a temporary indirect tax cut as a fiscal stimulus: evidence from the UK - Institute For Fiscal Studies - IFS

A VAT cut will help to keep inflation lower than it otherwise would be. When the last VAT cut came in in December 2008, inflation fell from 4.1% to 3.1%.

Reducing VAT to 17.5% would require a very short and simple statutory instrument. The standard VAT rate can be changed by up to 25% for up to a year through secondary legislation. This means no new primary legislation is required unless the cut needs to stay for longer than a year.