Darling: VAT will rise in January, but economic support must stay
Wednesday, 21 October 2009 01:35
Alistair Darling today confirmed the VAT drop will come to an end in January - but stated support for the economy should not be lifted too early.
The chancellor announced the 13-month drop in VAT from 17.5 per cent to 15 per cent last year and there were hopes it could be extended further.
However, Mr Darling has stepped on hopes his pre-Budget report next month could see the reduction extended.
He told an audience in Canary Wharf today: "In relation to VAT, I was very clear about that, it was to bring forward expenditure to this year.
"I did say it was for 13 months only and that is precisely what it is for."
He added the VAT cut brought forward spending to when the economy needed it more and prevented - along with other measures - the recession becoming a depression.
"The signal it sends out is to help to restore confidence," he said. "It is all about building confidence."
The key message from the speech - with a firm eye on a General Election next year - is that the nation faces a choice that will "define us for the next five to ten years".
Core to this, the chancellor claimed, was how support for the economy is managed.
"Judgements will be difficult. If you take it off support prematurely or in a way with little regard to fairness, that would be utterly disastrous," he said.
He added policies in the 1980s through recessions caused a jolt that took a "long, long time to get over".
"It is better to take off support too late than too soon," Mr Darling added.
"There's a lot of uncertainty. Many pitfalls still to be negotiated. The battle to stop recession becoming global depression is being won. But we must be ready to face a new challenge - to secure long-term sustainable growth.
"Ending support now would be wrong and dangerous. And I can tell you - not one of the 186 IMF members, across all political persuasions, believe that's the right thing to do.
"Withdrawing the support we've provided to the economy would put the recovery at risk and abandon people facing unemployment."
The chancellor also warned over assuming too early that the recession is done and dusted.
"One set of data showing positive growth will not be enough - we need to ensure that the recovery is embedded," he said.
The chancellor also went on to push for greater investment in digital and green technologies to form the basis of the economy rising out of the recession and maintain longer-term growth.
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