Shadow chancellor Ed Balls has argued that a VAT reduction could "put more money directly into people's pockets"
Shadow chancellor Ed Balls
has called for an emergency temporary VAT reduction, allowing consumers greater financial freedom from rising taxes and prices.
Balls argued that a VAT cut would kick-start the UK’s economy, which he argues is performing below the economy of any major competitors.
His speech offered no apologies for the Labour
party’s spending before or during the recession. However, he commented on the approach he believed was right to take with regards to spending cuts, saying that he was alone in thinking that tackling the UK’s deficit needed a less aggressive approach.
He supported his point, saying: "Looking at growth across the EU over the last six months compared to the previous six months, we have gone from the top end of the economic growth league table to fourth from bottom, with only Denmark, Greece and Portugal below us.
"While policymakers in the US are worried that their recovery is slowing down, the US has nevertheless still enjoyed growth of 1.2 percent over the last six months, compared to our zero."
Commenting on his proposal for a VAT reduction, he said that the plan would especially help those on low- or fixed-incomes by putting money directly into people’s pockets.
Balls said: "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 flatlining economy the jump-start it so urgently needs, boost jobs and help us get the deficit down for the long term.
He went on to comment on how Chancellor George Osborne
was handling the situation, saying: "The risk is that George Osborne will wreak long-term, as well as short-term, damage on the British economy by creating a vicious circle of permanently lower business investment, lower income and lower employment, which in turn requires bigger tax increases and deeper spending cuts to get the deficit down."
The UK’s current level of growth was also discussed, with Balls commenting on the fact that the forecast for growth has fallen by over a third in the last year.
He said: "Unemployment forecasts for the next four years have all been revised upwards. Inflation forecasts for the end of 2011 have risen sharply from 1.6 percent to 4.2 percent with a further increase next year, and the result of this slower growth, higher unemployment and higher inflation is that the government will have to borrow a further £46bn more than forecast after the spending review."