Shadow Chancellor Ed Balls has called for an emergency VAT cut to stimulate economic growth in the UK, which he says is lagging behind its major competitors. He said that Labour’s temporary VAT cut, when the level was reduced from 17.5% to 15% for 13 months from November 2008, boosted economic growth and lead to the deficit “coming in £21bn lower than expected”. In a speech at the London School of Economics, Balls said such a reduction can have “an immediate impact on people’s purchasing powers or the bottom line of businesses”. “The argument against is sometimes people don’t see it. The point is, whether you notice it or not, at the end of your shopping trip there is more money in your pocket because of the VAT cut which you then have an immediate decision about how to spend. “Even if companies didn’t pass it all on, it’s there in their bottom line - they can make a decision then about what other prices they cut or jobs [they create].” He added that a VAT cut would inevitably increase consumer confidence. push down inflation and reduce the risk of a “recovery-choking” interest rate rise later this year. “And it would give the flatlining economy the jump-start it so urgently needs, boost jobs and help us get the deficit down for the long term. “The risk is that George Osborne will wreak long-term, as well as short-term, damage on the British economy by creating a vicious circle of permanently lower business investment, lower income and lower employment, which in turn requires bigger tax increases and deeper spending cuts to get the deficit down.” Balls pointed to the sluggish growth in the UK compared to other countries. “Looking at growth across the EU over the last six months compared to the previous six months, we have gone from the top end of the economic growth league table to fourth from bottom, with only Denmark, Greece and Portugal below us. “While policy makers in the US are worried that their recovery is slowing down, the US has nevertheless still enjoyed growth of 1.2% over the last six months, compared to our zero.” His call is a boost for the industry’s campaign for a VAT cut for the leisure and hospitality sector.