A leading economic group has reported that Government’s much maligned offer of temporary cut in VAT has proved successful in stimulating consumer spending.

The Centre for Economic and Business Research (CEBR) has acknowledged that official retail sales figures of last 3 months provide strong evidence that VAT reduction is working well.

The introduction of VAT cut on December 2008 has given immediate boost to retail sales, informed Douglas McWilliams, chief executive, CEBR.

Annual retail sales growth was up from 1.6% in November to 2.6% in December. It accelerated further in January and came down marginally to 2% in February.

According to Mc Williams, CEBR’s economic models point out that sales growth would have dropped to zero by February had VAT concessions not been introduced in December. Retailers’ turnover grew by £2.1 billion during 3 months of VAT cut, which will be in force only till January 2010.

PM Darling’s proposal for VAT reduction was opposed by the political rivals and bitterly criticised by leading retailers. Chief executive of Next, Simon Wolfson had repeatedly complained that VAT cut was not helping his business, but according to CEBR, it enabled retail sales to grow continuously even during worst economic conditions in the UK since 1980.