VAT cut boosted consumer spending by £2bn

The government's cut in VAT is working and has led to an increase in consumer spending, according to research by economic consultancy The Centre for Economics and Business Research (CEBR).

The CEBR have said that the cut - which was introduced on 1st December 2008 - has led to an extra £2bn worth of sales and that the cut, which expires in January 2010 should be extended for another six months.

"The figures are clear; the VAT cut is working. There was an immediate boost to the volume of retail sales after the cut was introduced," the CEBR said.

"Annual growth in retail sales accelerated from 1.6% in November 2008 to 2.6% in December. Sales growth accelerated further in January to 3.2%, and registered a marginal decline in February to 3%."

The government's VAT has faced heavy criticism, with a recent poll by the Federation of Small Businesses finding that that 97% of firms polled said the VAT cut had "no impact at all," on their business.

Source: www.newbusiness.co.uk

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