No austerity but no VAT rate cut

  29 June 2020

Prime Minister Boris Johnson will in a statement on Tuesday rejecting austerity and promising a ‘decade of investment’ to help the economy recover – but chancellor Rishi Sunak has indicated plans will not include a cut in VAT or other taxes.

Mr Sunak said this is not a typical economic crisis where incomes are impaired, because of the support from the furlough scheme. “Psychology is the challenge” in persuading consumers to spend, he said to Bloomberg TV.

VAT cuts and other stimulus are likely to be held in reserve until after businesses reopen on 4 July, so the government can assess how the economy recovers. It was believed the chancellor was planning an emergency Budget for later in July but there has not yet been any confirmation of this.

Instead, Mr Sunak will follow the PM’s Tuesday announcement with his own address next week. Measures will include initiatives to reskill the unemployed and help the Government meet net zero carbon goals.

There has been no indication whether the latter will include any electric car-focused scrappage incentives.

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