Europe opens door to VAT cuts to help recession

1.21.00pm GMT Thu 26th Feb 2009

The European Parliament has supported allowing EU states to apply a lower rate of VAT to wider range of goods and services so they can boost demand and create jobs in response to the financial and economic crisis.

The new list backed by MEPs includes repair and renovations to improve energy efficiency, works on cultural and historic monuments including places of worship like churches, and restaurants and takeaways. This is in addition to an existing list of services where a lower VAT is allowed in order to boost jobs, including house repairs, domestic care and home help, cleaning, and shoe, garment & bike repairs.

London Liberal Democrat MEP Sarah Ludford commented:

"It would be up to each country to decide whether to take the opportunity of lowering VAT on these local purchases. But this is useful flexibility for EU finance ministers including Chancellor Darling."

"Clearly there is a balancing act, in that less VAT into the Treasury means less money for the national budget. But cutting costs for shoppers would lessen the strain on our purses and wallets and also bring valuable benefits to our local high streets in keeping businesses open and employees in jobs."

"Once again, Europe is bringing some credit crunch comfort. Let's hope the Labour government gives a positive response to this helpful Brussels lead at a time of squeezed household budgets and worries about job losses."