Chancellor mulls VAT cut and could follow up with autumn tax rises

Chancellor Rishi Sunak is reportedly considering cutting VAT in order to help stimulate the economy but could follow the move up with a set of Autumn tax rises. 

According to the Financial Times, Sunak is planning deferred tax rises and cuts to public spending in his autumn Budget as a follow up to further stimulus for the economy to be announced in the coming weeks.

Reports suggest that the Sunak may take a similar tack to that of former chancellor Alistair Darling following the 2008 stock crash reducing VAT from 20% to 17% or 15%. 

According to sources close to the chancellor cited by the Financial Times, an alternative being considered is a lower VAT rate for the tourism sector — including pubs, restaurants and hotels — is one option being discussed. 

It is suggested that any actions to lower VAT rates or other taxes would only come after the government loosens social-distancing rules.

The move to boost consumer spending comes after GfK’s Consumer Confidence Index revealed that consumer confidence had increased by six points to -30 in June.

The measure for the general economic situation of the country during the last 12 months has improved by one point to -59, but is still 27 points lower than in June 2019.

Expectations for the general economic situation over the coming 12 months were also up by nine points to -48 points.

Additionally, the Major Purchase Index increased nine points to -32 in June, 30 points lower than the same period last year.