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The Economy

Let us just deal with the specifics of the VAT cut. It means that at the end of each month, households across the country will be better off by an average of £20. The VAT cut is supported by the Institute for Fiscal Studies, which said that the effect is equivalent to an interest rate cut of around 1 per cent. Indeed, a VAT cut benefits everyone, unlike a cut in interest rates, which obviously has a different impact on savers and borrowers. It therefore has a fairer impact than simply using monetary policy to support the economy. The Office for National Statistics has said that price cuts have been passed on to consumers in 70 per cent. of cases, and Goldman Sachs has argued that the VAT cut is already having a beneficial impact on retail sales. It is right to support the economy, and to put that extra investment in. As a result of the measure, we are already getting billions of pounds of extra money into our economy. We believe that it is right to help the economy through a difficult time.