The British Chancellor has announced plans for a £20 billion injection to stimulate the UK economy between now and April 2010.
In his pre-Budget report to the House of Commons, Alastair Darling announced a cut in the VAT rate from 17.5% to 15% from December 1. The reduction will last for 13 months.
This year's increase in the income tax personal allowance of £120 a year for basic rate taxpayers is also to be made permanent and increased to £145 in April.
To persuade markets that the British government will balance its books once the economy improves, Mr Darling announced plans for deferred tax rises and public spending curbs.
One measure included a new 45% income tax rate on individual earnings of over £150,000 if Labour wins the next election, up from the current top rate of 40%.
The measures lifted London's stock market, with the FTSE up almost 10%.
The Chancellor also said UK air passenger duty would be reformed into a four-band system, in an effort to ensure that those who travel further and have a larger environmental impact meet the cost.
Mr Darling also lowered his forecast for the UK economy next year to a range of -0.75% to -1.25%.
A group representing the retail sector has expressed concern about the British move to reduce its VAT rate.
Retail Ireland, part of employers' group IBEC, said the move would make Ireland less competitive and 'compound the problem of people crossing the border to shop'. Its director Torlach Denihan said the consequences for border towns would be very serious and urged the Government to consider lowering the VAT rate.
