‘Cut in VAT rate would help economy’, says poll

Reversing January’s VAT rise and cutting the rate of the tax on home improvements has been voted as the measure most likely to boost economic growth, according to a poll by Moore and Smalley.

The rate of VAT was raised from 17.5 per cent to 20 per cent at the beginning of 2011, but some economists have called for the increase to be reversed to encourage spending by consumers and provide a boost for businesses.

A third (33 per cent) of business owners questioned in the online poll, conducted by Moore and Smalley, agreed that a VAT cut would help provide a shot in the arm for the economy by stimulating consumer confidence.

Stephen Gregson, corporate finance director at Moore and Smalley, said: “Giving the general public the confidence to spend money, and also giving businesses the belief to make investment decisions, is seen as the key driver of economic recovery and this appears to be backed up by the results of our poll.

“While it’s a good sign that businesses and individuals have been reducing debt, government somehow needs to find a way of encouraging consumers and businesses to invest some of the money they are holding onto without endangering the recovery.”

Over a quarter of those surveyed in the poll (28 per cent) said that relaxing planning laws to boost the homebuilding and construction sector would be the best way to boost growth.

17 per cent thought the regional growth fund cash would be the best way to get the economy back on its feet.

Meanwhile, forming a green investment bank to support funding for environmental projects and enforcing a bank bonus tax to boost affordable homes spending were seen as least likely to drive the recovery with just 11 per cent of respondents voting for each measure.