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UK Chambers of Commerce call for VAT cut and National Insurance hike to be reversed Business News

Chancellor Rishi Sunak is under renewed pressure to announce an emergency budget to help Britain avoid a painful recession amid rising costs of living and plummeting consumer confidence.

The British Chambers of Commerce (BCC) wrote to Mr Sunak on Monday urging him to immediately announce measures to ease the costs facing businesses and households.

In an open letter, the BCC called for a three-point plan that would reduce VAT on energy bills from 20% to 5%, offer free Covid tests to businesses and reverse a recent hike in national insurance.

It came as early signs showed the health of the UK economy. Last week, the Bank of England forecast inflation to hit 10.25% when energy bills rise again in October.

The Bank predicts that massive increases in the cost of basic necessities will lead to cuts in other spending, causing the economy to contract in the last quarter of the year before stagnating in 2023.

Consumer confidence plunged to near historic lows in April, driven by the rising cost of living. Meanwhile, retail sales have fallen, according to a survey by the Confederation of British Industry.

Shevaun Haviland, chief executive of the BCC, said his plan was simple, straightforward and could be reversed when the economy improves.

“Making these changes would have an immediate benefit for businesses and the public.

“The cost crises facing businesses and street citizens are two sides of the same coin. If we manage to ease the pressure on businesses, they will be able to contain the price increases caused by rising energy bills, staff shortages and rising taxes.

“Businesses will then have the breathing space they need to increase productivity and strengthen the economy. But a change of course is needed now, if the government does not act immediately, then rising costs will put our economic recovery in a stranglehold that will have repercussions for years to come.

“The government has a variety of financial levers it can use, and now is the time to use them. Acting now will then give companies a chance to create the future profits needed to fill the tax coffers.

Shoppers in Dudley last week

(AFP/Getty)

Postponing the National Insurance contribution hike would ease pressure on businesses and put money back in consumers’ pockets, the BCC said.

Cash flow would also be helped by reducing VAT on commercial energy bills. Unlike households, businesses are not protected from rising gas and electricity costs by Ofgem’s price cap.

Under the BCC’s plan, a small business currently paying £10,000 for energy would pay £1,500 less in VAT.

The business group said many businesses were still struggling with high numbers of absences due to Covid symptoms or self-isolation.

The government recently scrapped free Covid tests for employers. Bringing it back would allow companies to limit the spread of the disease among employees, the BCC argued.

“With deeper structural staff shortages continuing to limit productivity, this would be a key measure to keep the economic recovery on track,” the BCC wrote.

Households are set to be hit with a devastating 40% rise in their energy bills this winter, pushing inflation to 10.25%, a level not seen since 1982.

Average gas and electricity bills are expected to hit £2,800 when Ofgem raises its price cap to reflect a rise in wholesale energy costs, which has been exacerbated by the war in Ukraine.

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Source: www.independent.co.uk
This notice was published: 2022-05-09 17:01:02

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