Balls tax cut

What Ed Balls, Shadow Chancellor, is actually saying about a temporary tax cut:

"When the last Labour government temporarily cut VAT to 15 per cent for 13 months, he (Osborne) dismissed it, saying people wouldn't even notice.

He may not have noticed – but at the end of each month, millions of families did see extra money in their pockets, and thousands of businesses saw the difference in their bottom line.

As the IFS has said it proved an “effective stimulus”. And the economy received a much-needed injection which helped it return to growth, led unemployment to fall and saw the deficit come in £21 billion lower than expected.

So my suggestion to George Osborne is that, while he will not agree to reverse his mistaken VAT rise permanently, he should now reverse it temporarily until the economy is growing strongly again:

-       By putting more money directly into people’s pockets, it would be a boost for consumers who are feeling the squeeze from rising prices and rising taxes – especially pensioners and those on low and fixed incomes;

-       The inevitable increase in consumer confidence would help the struggling retail sector;

-       It would help to push down inflation – and so reduce the risk of a recovery-choking interest rate rise later this year;

-       And it would give the flat lining economy the jump-start it so urgently needs, boost jobs and help us get the deficit down for the long-term.

The question is not the cost to George Osborne of paying for this temporary emergency tax cut, but the price our country will pay if he carries on regardless.

Slowing down the pace of deficit reduction with a temporary VAT cut now would give the flat lining economy the jump-start it so urgently needs, boost jobs and be a better way to get the deficit down for the long-term."