FSB: Targeted VAT cuts needed to restore growth

VAT cuts must be put in place to restore growth in key sectors, says the FSB.

The lobbying group says that the government must rethink its growth strategy in the face of falling business confidence.

Businesses were less confident in the second quarter of 2011 than they were at the start of the year as the FSB ‘Voice of Small Business' Index fell by 6.4 points in the first quarter from +6.7 to +0.3.

The group is calling on the government to follow the lead of other EU countries and cut VAT in the construction and tourism sectors to 5 per cent for a year to help give the economy a real boost.

Consumer demand is a large barrier to economic growth so a VAT cut would encourage people to spend in these areas, says the organisation.

FSB national chairman John Walker also says that, in an economy characterised by high unemployment and muted demand, more needs to be done to encourage businesses to take on staff and grow their business so that the recovery can get back on track.

‘Since the start of 2010, the FSB Index has proved to be a good barometer of the path that economic growth will take, so the news that it has fallen back to almost zero paints a very worrying picture for GDP,’ adds Walker.

‘We now need the government's actions to match its rhetoric, and it must finally deliver on actions in its growth strategy. We must see a cut in VAT to 5 per cent in the construction and tourism sectors to boost consumer demand. It is tangible measures like this that will actually help small businesses to be able to grow their businesses and grow the economy.’



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