VAT cut has delivered little ‘benefit’
A new poll has revealed that businesses believe the cut in VAT, introduced by the government in an effort to stimulate consumer spending, has done little good.
According to the British Chambers of Commerce (BCC), 76 per cent of 400 firms responding to the survey felt that the VAT cut had been of no benefit to their businesses, while nearly a fifth claimed the cut had actually been a burden.
The poll also found that businesses are increasingly pessimistic about their prospects, with 43 per cent expecting turnover to fall up to 50 per cent over the next three months and 28 per cent indicating they would be reducing working hours over the same period.
There was scepticism about the role of banks too. Less than half of respondents (45 per cent) thought that their local bank manager understood their business needs and tried to accommodate them.
Steve Hughes, economic adviser to the BCC, said: “The dangers facing the business community are plain to see in these results. Confidence in the economy is non-existent, and this requires an incisive response from government.
“Some of the government’s initiatives have been gratefully received, but the £12.5 billion VAT cut at the centre of the fiscal stimulus would clearly have been better spent elsewhere.”
Mr Hughes urged the government to act to restore the availability of credit and to use tax measures to support smaller businesses: “When the Chancellor gives his Budget in April, it must include measures to ease cash-flow difficulties and promote the retention of jobs. Cutting National Insurance Contributions, freezing the minimum wage and slashing business rates would all help hard-pressed businesses.”