The Liberal Democrats have called on the Government to cut VAT, to help families with the cost of living while keeping soaring inflation in check.
It comes as the Chancellor Rishi Sunak rejected calls to cut taxes now as he claimed it could risk fuelling inflation.
When the last emergency VAT cut was introduced in December 2008, inflation fell from 4.1% to 3.1%. The ONS also found that the cut to VAT in the hospitality sector in 2020 led to a fall in consumer inflation.
The Office of Budgetary Responsibility (OBR) has forecast that Rishi Sunak is due to rake in an extra £8.6 billion in extra VAT due to inflation over the next year, or £430 per family.
Liberal Democrat Treasury Spokesperson Christine Jardine said: “Rishi Sunak’s excuses for failing to reduce taxes during a cost of living emergency simply don’t wash.
“Slashing VAT is one simple tax cut the Conservatives could introduce now to help families while keeping inflation under control. Instead ministers are sitting on their hands and cashing in billions in additional VAT tax receipts while people struggle to pay their bills.
“We have seen in the past how an emergency VAT cut can bring inflation down while encouraging spending in our shops. This move would put money into people’s pockets and reduce prices at the shops and at the petrol pump. It should be a no-brainer.
“The Chancellor doesn’t need to wait for the next Budget, he could bring in this tax cut at a stroke of a pen now.”