I am pleased to have the opportunity to speak in today's debate, which is one of the most important that the House is holding. It is about how effectively we are addressing the issues affecting the UK economy: jobs; the survival of businesses; and protecting the individuals who are hit the most by the downturn. We are at a defining moment in our response to the economic challenges that we face. More of the same will not work; the challenges have changed and so must our response.
In changing our response, I believe it is time to bring forward the end date of the VAT reduction. I supported the measure when it was introduced because it had an immediate impact and it was right to introduce it at the time. There was no doubt about that, because we wanted to get money into the economy very quickly and the way to do so was through a VAT cut. That worked at the time, and I do not question the Government. The measure was about helping hard-working families, but there are now signs that the policy intervention has run its course. That was recently highlighted by the Office for National Statistics, which stated that companies are increasingly deciding to reverse the VAT cut; in fact, some local authorities never introduced it, and that has always been a problem.
In addition, we have to assess the opportunity cost of this measure. The VAT reduction has been quite expensive—Treasury figures show a cost of £8.6 billion between now and the end of the year. That sizeable amount could be better redirected in a targeted way to help those in greatest need. One option is to introduce a time-limited wage subsidy scheme, targeted to keep open viable businesses that are struggling due to the economic downturn. The Government have rightly introduced measures to help those who are unemployed, but surely we should be acting to prevent unemployment in the first place—that would be the way forward.
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