Tax cuts ‘will not boost spending’

The introduction of tax cuts in the pre-Budget report would not encourage Britons to increase their spending, research has found.

Instead, many would use the opportunity to increase contributions to their savings or try and become debt free, a report commissioned by Axa has concluded.

According to the survey, 33 per cent would use the extra funds generated by a tax cut worth £60 per month to reduce their debts, while 43 per cent would save the additional income.

And only one in five (22 per cent) would boost their spending as a result, the research found.

“Worries about the state of the economy and job security in 2009 would lead many Britons to take advantage of a tax cut by shoring up their finances, reducing their debts or increasing savings,” Axa’s Steve Folkard explained.

A recent study by Direct Line found the majority of shoppers plan to spend the same or more than in recent years on Christmas, despite the economic downturn.

By Tom Musk