The Centre for Economics and
Business Research (CEBR) is urging the government to slash VAT by five
percentage points, to 12.5% until the end of 2009, to prevent a devastating
The research group warns Gordon Brown’s bank rescue is starting to unravel.
‘The position in the UK is so bad that it cannot be resolved without Keynesian
measures. Public works would take too long to organise, though they may be part
of the solution for later years. What is needed now is an early tax cut,’
Douglas McWilliams, the CEBR’s chief executive, told The Daily
‘We’re very worried about the risk of deflation. There is a severe crisis of
confidence, which means interest rate cuts will have less effect than usual.
Most businesses are battening down the hatches to maximise cash, and we think
they will cut investment by 30% to 40% next year.’
CEBR said that, although the gross cost to the Treasury would be £24bn, the
net cost might be far lower if prevented a devastating recession eating into tax
revenue. The group predicted the budget deficit might reach £110bn in 2009 – or
close to 8% of GDP.
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