Lib Dems demand emergency VAT cut to help families with cost of living crisis

A press release from the Lib Dems, which is already getting some nice front page coverage, brings the news…

  • Ed Davey calls on the Chancellor to slash VAT from 20% to 17.5% for one year to tackle soaring bills.
  • The move would save families an average of £600 as the cost of living crisis hits hard.
  • Slashing VAT would boost struggling local high streets and the economy while keeping spiralling inflation down.

The Liberal Democrats have demanded an emergency cut to VAT to protect families from soaring bills and the worsening cost of living crisis.

The party has proposed reducing the standard rate of VAT from 20% to 17.5% for one year, a move that would put an average of £600 back into the pockets of UK families. It comes amid warnings that the war in Ukraine will worsen the cost of living pressures facing households, with energy, food and fuel bills all expected to rise further. Inflation is forecast to reach 8% in April, its highest level in decades.

Under the Liberal Democrat plans, the economy would be boosted by shoring up consumer spending and supporting local high streets up and down the country. The proposal would also be expected to keep inflation lower than it would have been.

The emergency change to VAT could be rapidly introduced by the Chancellor for one year without the need for new primary legislation. The Liberal Democrats have said he should use the Spring Statement on March 23 to bring forward the change and scrap the Conservatives’ National Insurance tax hike, to offer much-needed respite to millions of families.

Liberal Democrat Leader Ed Davey said:

This is crunch time for the Conservatives and the Chancellor. Their cost of living crisis is hitting families hard and it is about to get worse. Will Rishi Sunak act or will he let families up and down the country suffer more financial pain?

An emergency cut to VAT is desperately needed for the millions of people around the country worried about making ends meet. High street businesses that fear going to the wall would receive critical support, as people who are feeling the pinch spend more at their local shops, cafes and restaurants.

This is a once-in-a-generation crisis, and the government must step up to help struggling households and businesses on the brink. Instead of clobbering struggling families with a tax hike, the Chancellor should be putting money back into their pockets.


The Liberal Democrats are calling for the standard rate of VAT to be reduced from 20% to 17.5% for one year. The party’s analysis suggests this would save households around £600 on average.

Cutting VAT would help the retail industry, giving a much-needed boost to local high streets and increasing economic growth. A similar VAT cut in 2008 was found to boost retail sales by about 1%, increasing aggregate expenditure by around 0.4%.

A VAT cut will help to keep inflation lower than it otherwise would be. When the last VAT cut came in in December 2008, inflation fell from 4.1% to 3.1%.

Reducing VAT to 17.5% would only require a very short and simple statutory instrument. The standard VAT rate can be changed by up to 25% for up to a year through secondary legislation. This means no new primary legislation is required unless the cut needs to stay for longer than a year.

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One response to “Lib Dems demand emergency VAT cut to help families with cost of living crisis”

  1. Only for 1 year?
    A economy prospers when the velocity of money moves through the system and any restraint, including purchase taxes, causes the economy to slow down. The VAT is too high as it stands and it would be better to apply higher income taxes on higher salaries rather than a blanket tax on consumption.
    All companies trading over a certain value in a country should trade through a local company to pay taxes in that country. including Microsoft, Amazon, Meta, etc….

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