Liz Truss is apparently mulling the ‘nuclear’ option of cutting the standard rate of VAT by five percentage points to support the economy. This has triggered a predictable backlash from my fellow policy wonks, led by the Institute for Fiscal Studies (IFS). However, in these extraordinary times, every lever may have to be pulled.
The case for a temporary cut in VAT is straightforward. The UK is on the brink of a massive economic and social crisis. Lowering VAT would be a simple and quick way to boost spending power. The annual saving would average out at around £1,300 per household, returning some of the extra tax that people are paying as a result of higher nominal incomes and prices.
Headline inflation would also be lower as a result, albeit just for one year. And even if the VAT cut is not passed on in full to customers, struggling businesses…
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Utopia, you are standing in it! 
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