Alistair Darling today slashed VAT in a £20 billion cash boost to revive the ailing economy.
But he said the give-away would have to be paid for with increases in duty on petrol, alcohol and tobacco.
Price of fuel, alcohol and tobacco set to rise
VAT to be cut from 17.5% to 15% for a year from next Monday – but alcohol and tobacco rates won’t be cut. The Chancellor said that petrol prices had already fallen by 7 pence a litre last month alone.
Pre-budget report welcomed by carmakers
Commenting on the report, Paul Everitt, Chief Executive of SMMT (Society of Motor Manufacturers and Traders ) said: ‘The chancellor has made a positive first step to help restore consumer confidence and kick-start responsible spending. We now need to see action to remove the constraints on credit and finance so consumers and businesses can take advantage of the changes announced today.
The 2.5% cut in VAT combined with the recent cuts in interest rates will encourage consumer spending, impacting on both the new and used vehicle markets. Any move to boost responsible spending is welcome but specific action to improve the affordability and accessibility of credit is needed if the vehicle market is really going to benefit.’
Environmental group welcome fuel duty rise
The Campaign for Better Transport welcomed the promised two-pence-per-litre petrol duty increase but expressed dismay at the £700 million now available for road construction.
Campaigns Director Jason Torrance said: ‘The Pre Budget Report could have announced a ‘Green New Deal’, but instead the Chancellor has taken one step forward and two steps back to a future of accelerated road building. Public transport users are facing above inflation fare hikes and the Chancellor’s solution is to speed up investment in road schemes that won’t solve congestion but will lock us into car dependency.’
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