Reducing the overall figure by 20% would reduce the tax burden for millions of people.
Steve Barclay, the Prime Minister’s chief of staff, has reportedly suggested cutting the rate temporarily – but the Treasury has warned it could fuel inflation by overstimulating the economy.
And cutting it to 17.5% would cost the government around £18billion.
John O’Connell, chief executive of the Taxpayers Alliance, said: ‘Now is the time to help unleash growth by giving taxpayers a break from tax hikes.’
Alistair Darling, former Labor Chancellor, cut VAT from 17.5% to 15% immediately after the 2008 financial crisis, an approach credited with helping economic recovery.
However, Paul Johnson, director of the Institute for Fiscal Studies, said: “Inflation was not the issue then and the reduction in VAT was appropriate then.
“At the moment, increasing demand when there are clear supply-side constraints may make the situation more problematic.”
Boris Johnson has pledged to cut taxes, calling them the ‘biggest household going out’ – but with little action, his backbench MPs are growing impatient for him to prioritize cuts taxes rather than infrastructure spending.
Figures show that the number of people due to be subject to the top tax bracket will reach 6.1 million this year, up from 4.3 million in 2019.