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Alistair Darling set to announce VAT cut on Monday

Chancellor Of The Exchequer Alistair Darling is set to announce a 2.5% reduction in UK VAT as part of his pre-budget speech this week. The move is expected to cost the Treasury in the region of £12 billion a year and is expected to be in place for two years. If the rumours are correct it looks as though the rate will fall from 17.5% to 15%, which is the lowest rate allowed under EU regulations.

This is probably the best move on behalf of the government as it will ensure that extra spending money is felt in the consumer pocket straight away. It also looks as though a number of smaller tax reduction programmes will be brought to the table with £120 a year rebates for basic rate taxpayers, the postponement of the rise in car tax duty and plans to increase tax for small businesses will be dropped for the time being.

It seems also the last few days of conflict between the Treasury and Number 10 Downing Street have been resolved and while the tax reduction budget will attract some criticism and cries of bribery for voters, its will on the whole be well received if the rumours are true.

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