Such a decision would be a huge boost to the stores, which were forced to close for months, in the framework of the draconian restrictions to fight against the pandemic. Although there was a surge when the non-essential retailers are allowed to reopen last Monday, the trade is still running at only 40% of normal. It happens that two former Chancellors called for VAT to be lowered immediately.
Mr Sunak is preparing to organize a mini-Budget early next month, which should include tax cuts to stimulate consumer spending and business investment.
It has already warned that the country is facing a “severe recession is not like the others” while economists have predicted that it could be the worst recession since 300 years, with the 1980s, the levels of unemployment.
The cut of the VAT, the cost the Treasury billions and drive up the public debt even further, but the companies have a great need of a tonic and enable them to consolidate their finances.
Other plans have been considered by the Treasury include a three-month extension to a project which allows businesses to defer payment of VAT until next year, as well as a cut to employer national insurance to boost staff retention.
A similar strategy has been adopted by former chancellor Alistair Darling in the wake of the 2008 financial crash.
The former Chancellor, Sajid Javid has said that he would support a one-year cut in the top rate of VAT of 17%.
“If it is temporary and that you actually in the end of overeating of growth, in the long term, you can do a lot of that,” he said.
“The priority must be the creation of jobs. “
A new report from the Policy Exchange think tank today (Monday) urges the Government to take immediate measures to stimulate consumption.
The book, co-written by Dr Gerard Lyons, former economic adviser to Boris Johnson, is supported by Lord Darling, who writes: “After the Covid-19 crisis subsides, we will enter a new period of recovery. The increase in taxation will not be the answer here, even as the budget deficit and the public debt increases.
“If anything, emergency, tax cuts – reduction of VAT to 15%, for example, as I did in November 2008 – should be considered to stimulate consumption.”