The Liberal Democrats are advocating for a 5% reduction in VAT, proposing to lower the rate from 20% to 15%. This initiative aims to support the struggling hospitality sector in the UK, which includes pubs, restaurants, and entertainment venues. Deputy leader and Treasury spokesperson Daisy Cooper has emphasized that this fiscal measure could enhance foot traffic in these establishments, allowing individuals to enjoy small pleasures such as dining out.
Cooper suggests that funding for this VAT cut could be sourced from a newly proposed windfall tax on large banks, a measure originally outlined by the Institute for Public Policy Research (IPPR). This tax is projected to potentially generate around £30 billion by 2030.
Recent polling by More in Common indicates that over half of the population feels that going out to eat or drink has become too expensive. Cooper noted that many individuals are experiencing financial strain, making it challenging for them to afford leisure activities previously considered routine.
Chancellor Rachel Reeves is anticipated to diverge from Labour’s prior commitments regarding tax increases in her upcoming budget speech. While there are hints that she may eliminate the two-child benefit cap, a VAT cut is not expected.
In addition to the VAT reduction, the Liberal Democrats propose a decrease in energy bills by approximately £90 annually through the removal of the main renewables levy. They argue that this move would lower energy costs to their lowest level since the onset of the energy crisis in 2022.
The party claims its combined initiatives could be implemented immediately for 18 months, benefiting average families by potentially saving them £270 per month until April 2027. The total estimated cost for this package is approximately £12 billion, with £7.5 billion allocated for the VAT reduction and £4.5 billion for the renewables obligation replacement.
The potential windfall tax on banks might yield an estimated £7 billion annually. Cooper has suggested that the revenues could also support a proposed Energy Security Bank, aimed at funding green energy home loans, with a planned launch by the 2027-28 financial year. The overall energy strategy of the main political parties varies, with the Liberals aligning with the Conservatives on ending the renewables obligation, while Labour and the Green Party focus on expanding renewable energy efforts.
Source: https://www.bbc.com/news/articles/c77zy6m842do?at_medium=RSS&at_campaign=rss