Targeted VAT cuts needed to restore growth

A small business group has called for targeted and time specific VAT cuts in place to restore growth in key sectors.

The Federation of Small Businesses (FSB) is calling on the Government to follow the lead of other EU countries and cut VAT in the construction and tourism sectors to five per cent for a year to help give the economy a real boost. It makes its case as its latest figures show that business confidence has fallen dramatically.

FSB figures show that businesses were less confident in the second quarter of 2011 than they were at the start of the year as the FSB 'Voice of Small Business' Index fell by 6.4 points in the first quarter from +6.7 to +0.3.

By targeting VAT cuts in construction and tourism, the FSB believes that small firms will be able to drive job creation and boost consumer spending – something the Government's growth plan has so far failed to do.

Evidence from other EU countries shows that any lost revenue to the Exchequer by making VAT cuts will be met by earnings from additional demand, jobs and the wider economic activity.

John Walker, National Chairman, Federation of Small Businesses, said: "We now need the Government's actions to match its rhetoric, and it must finally deliver on actions in its growth strategy.

"We must see a cut in VAT to five per cent in the construction and tourism sectors to boost consumer demand. It is tangible measures like this that will actually help small businesses to be able to grow their businesses and grow the economy."