Shadow chancellor Ed Balls has stated that he would “cut VAT by Monday” if Labour were back in power.
Speaking in Kent as he tours local micro businesses, the Labour MP claimed that cutting VAT was the best solution to helping the economy grow.
Speaking to Kieran Watkins, Mr Balls said: “It is clear with the economy flat lining that we will lower VAT as soon as possible.
“If we were in government today, I would lower VAT by Monday.”
The declaration by Mr Balls comes after the latest GDP (Gross Domestic Profit) forecasts show the UK economy has shrunk by 0.3%, raising fears of a triple dip recession.
With major retailers like Jessops and HMV going under, Mr Balls warned that the future remained bleak for the UK’s economy.
“Times are really hard for every retailer at the moment, particularly hard for retailers on the High Street such as Jessops or HMV.”
Last year, more than 580 companies in England and Wales fell into administration in the last three months, with big names like Comet and Clinton Cards being the big fatalities of the High Street.
In total, 3,834 companies went into liquidation in 2012. 276 into receiverships and 151 entered into company voluntary arrangements.
But a local Conservative councilor in Medway dismissed Ed Balls’ plans to cut VAT.
Mike O’Brien, councilor for Rainham Central, said: “Having been part of a Labour Government that left the country almost bankrupt I would pay no heed to what he says.”
The Portfolio Holder for Community Safety and Customer Contact for Medway also said: “He is now in opposition and can make grand statements that he doesn't have to substantiate.
Economic advisor for the British Chamber of Commerce, Steve Hughes, explained how much it would cost the taxpayer to lower the VAT.
“Taking the fiscal credibility point first, the cost to the Exchequer of changing the standard rate of VAT by one per cent is approximately £5bn a year.
“In other words, reducing the rate from 20 per cent to its previous 17.5 per cent would cost in the region of £12.5bn.”
In a statement from the Treasury, the department insisted the 20% VAT was helping, rather than hindering the economy.
“The VAT increase raises a significant amount of revenue and is therefore an important part of the Government’s deficit reduction plan.
“Reducing the rate of VAT would undermine the Government’s fiscal strategy, risking a loss of credibility that could have a far larger negative impact on the economy than the positive economic impact that might otherwise be expected as a result of a VAT cut.”
Picture taken by Kieran Watkins