Rishi Sunak must cut VAT to tackle cost-of-living rise, say Lib Dems

The Liberal Democrats have urged Chancellor Rishi Sunak to cut VAT from 20% to 17.5% for a year to help households cope with rising bills.

Leader Sir Ed Davey said this would save families £600 on average and allow the high street to carry on by easing the pressure on consumers.

Inflation is expected to soon exceed 7%, with food and energy costs, council taxes and social security rising.

The government has already ruled out reducing VAT on energy bills.

And a source told the BBC it was “very difficult” to politically reverse that decision.

But the Treasury said it was making a further £20billion available this financial year and next to help families.

The Resolution Foundation think tank warned this week that UK households have faced the biggest fall in real income since the mid-1970s, leaving the typical household £1,000 worse off.

The Bank of England says inflation is expected to hit 7.25% next month, while the Institute for Fiscal Studies (IFS) predicts it could top 8% later in the year.

The Lib Dems, who are holding their online spring conference this weekend, want Mr Sunak to use his March 23 spring statement to cut sales tax.

They are also urging him to scrap the 1.25p of the pound increase in Social Security which is due to arrive on April 1 – which the Government say will help deal with the NHS arrears caused by the pandemic and later fund the social welfare serves.

Sir Ed said: “This is a difficult time for the Conservatives and the Chancellor. Their cost of living crisis is hitting families hard and it’s only going to get worse.”

Energy bill price caps will rise in April, costing the average household an extra £693 – or 54% – a year.

Local taxes are also set to rise in many areas, while gasoline prices, hit by the Russian invasion of Ukraine, have hit record highs.

As a small presence in Parliament, the Liberal Democrats must seize every opportunity to gain attention.

This proposed VAT cut aims to show the party has a plan in place to alleviate the financial pressures being felt by households across the UK.

But watch the Lib Dems’ spring conference this weekend for more on their priorities elsewhere.

The party will pursue a long-term policy for the UK’s entry into the single European market.

There is hope that when the dust settles after Brexit, at least arguments for future rapprochement with the EU can be made and heard.

And then there is talk of a pact with Labor in the next elections.

Although neither party would put it that way, less subtle signals are being sent that it is in both parties’ interests to step down in specific areas where the other has the best chance of unseating a Conservative MP.

“An emergency VAT cut is urgently needed for the millions of people across the country who are worried about making ends meet,” said Sir Ed.

“High Street shops fearing they are going to the wall would receive critical support as people feeling the hardship spend more at their local shops, cafes and restaurants.”

Labor is also demanding that the government scrap increases in national insurance and levy a one-off windfall tax on oil and gas producers’ profits.

“The Tories have spiraled the cost of living crisis… and now they’re going to make it worse by hitting working people and businesses with a tax hike at the worst possible time,” Shadow Treasury Secretary Pat McFadden said.

The Treasury said by freezing fuel taxes for the 12th year in a row it had saved drivers around £15 every time they filled up their tank.

A spokesman added that the reopening of the economy with the easing of Covid restrictions has not resulted in a “VAT windfall”, with revenue expected to be £2bn below pre-pandemic levels this year.

“We’re making over £20billion available to help families this financial year, which includes reducing the Universal Credit cone rate, freezing alcohol taxes and helping households with their energy bills through our £9.1billion energy bill rebate includes,” they said.