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4 July 2011

Boris backs Balls’s VAT cut

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

By George Eaton

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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