The Staggers

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Boris backs Balls's VAT cut

Johnson says a VAT cut would "get people shopping again".

By George Eaton Published 04 July 2011 14:07

For weeks, the Tories have denounced Ed Balls's call for a temporary VAT cut as "unaffordable" and "unfunded", with David Cameron describing it as "the height of insanity". But the reliably contrarian Boris Johnson has just broken with the consensus. In today's Telegraph he writes: "I am not saying that the 50p rate is the only problem: if we were to cut taxes now, it might be best to start with VAT to get people shopping again."

Boris is right. As I've pointed out before, a temporary VAT cut would boost consumer spending, lower inflation (thus reducing the risk of a premature rate rise), protect retail jobs and increase real wages. When Alistair Darling reduced the tax to 15 per cent during the financial crisis, consumers spent £9bn more than they otherwise would have done. A VAT cut today would be a similarly effective fiscal stimulus.

Boris joins Guido and Mark Littlewood, the director of the Institute for Economic Affairs, as a right-wing figure who has endorsed a VAT cut. Isn't it time for Osborne to put politics aside and follow their lead?

Hat-tip: Don Paskini.

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Tags: Ed Balls VAT Boris Johnson

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7 comments

Sun, 2011-07-10 18:34 — Lox (not verified)

Have to agree with Mr D-since we don't make very much stuff anymore, a decrease in VAT is going to feed through into our balance of payments. Increase VAT, decrease income tax. Consumption is a choice, not a right.

Mon, 2011-07-04 14:41 — Dave C (not verified)

There's a story that when BoJo goes off-message, it's with the covert blessing of Cameron and Osborne. For example:
http://www.guardian.co.uk/politics/blog/2011/jun/22/boris-johnson-david-...

However, it's difficult to see that in this instance.

Sat, 2011-07-09 19:20 — red mary (not verified)

Mr Divine increase vat to 50% I say@yes that will get the economy growing again, and food is not plastic junk

Mon, 2011-07-04 21:54 — Eddy S (not verified)

so if boris says VAT cuts are good then it makes it right? i don't think so. to rebalance the economy we need to reduce imports and consumption and increase investment and exports. VAT increase will help in this regard.

Mon, 2011-07-04 23:25 — Ivan (not verified)

Boris is a cute politician and is trying to stake the ground out to replace Dave if the nasty medicine proves too repellent. And despite the floppy haired foppery he's not an idiot: listen to him being interviewed, he has a discouncerting habit of addressing and answering questions which must make him unique (bar Ken Clarke) in current UK politics. But this argument (like the opposition to HS2) is just naked opportunism. Our only hope is to rebase the economy towards fewer imports (what we'd buy with lower VAT) and higher exports. It's sort of what the Attlee govt. tried to do to get out of a parallel debt fix after the war. Why can't people understand that there may just not be a painless solution?

Mon, 2011-07-04 23:48 — FonyBlair (not verified)

He's talking about a permanent cut not a cynical political Balls stunt! Boris is a low tax high growth Tory. Balls on the other hand would always turn to higher taxes by default.