Umunna: Government should give a boost to the High Street now by cutting VAT

The government should mark Independents’ Day by cutting VAT says Shadow Minister for Small Business and Enterprise Chuka Umunna MP.

Today (4 July) the public is being encouraged to buy at least one item from their local, independent shop to keep the high street alive as part of “Independents’ Day”. Independents’ Day was established by Skillsmart Retail , the National Skills Academy for Retail, independent retailers and trade associations to encourage the public to celebrate diversity on the high street and support their local, independent shops.

A number of high street retail chains have recently announced store closures and job cuts including Jane Norman, Carpetright and Habitat. Local independent stores are also struggling with high street voids on the rise again as consumer confidence has dropped. According to a survey published last week by GfK NOP, consumer confidence has fallen significantly in the last month, slipping by four points to minus 25 on the index.

To boost the high street and consumer confidence, Labour’s Shadow Minister for Small Business and Enterprise Chuka Umunna MP, says the Tory led government should temporarily cut VAT.

Independent research by the British Retail Consortium in May 2010 found that increasing VAT this year to 20% would cost 163,000 jobs over 4 years and reduce consumer spending by £3.6 billion over the same period. In a January 2011 YouGov poll four fifths of retailers said the VAT increase would undermine sales and in January 2011 more than a third of Federation of Small Businesses (FSB) members said they would lose customers as a result.

Labour enacted a temporary cut in VAT from 17.5% to 15% in the November 2008 Pre-Budget Report – this reduced the tax liability for both businesses and households by around £11bn and increased GDP by 0.5 per cent. According to the Centre for Economics and Business Research, the temporary VAT cut boosted sales by between £8 and £9 billion. A temporary cut in the VAT rate now from 20% to 17.5% should be introduced.

Commenting, Shadow Minister for Small Business and Enterprise Chuka Umunna MP said:

“We are now seeing the true cost of the Tory led government’s VAT hike with the wave of retailers going into administration, hurting consumers and jobs by choking off growth.

“The Tory-led Government should support local, independent shops by enacting Labour’s VAT cut now to put confidence back into the high street and money into consumers’ pockets. The Tory-led government’s VAT hike is costing the average family £450 a year.”