We'll save instead of spending if the Government cuts taxes

Economic stimulus may not be enough to rescue the high street

Fewer than one in four Britons will increase their spending in the shops should the Government cut taxes this week in the pre-Budget report, a survey from AXA suggests.

Far more, 43 per cent, told the insurer that they would save any tax rebate. One in three said they would use the extra cash to repay credit card and loan debt.

AXA's research reveals that a tax cut equivalent to £720 a year for every British adult (costing the exchequer £33bn) would result in a maximum of £7.2bn being spent on the high street.

The International Monetary Fund has said that the Government will need to cut the tax bill of the average UK family by at least £1,000 next year to help avert a severe recession.

"Worries about the state of the economy and job security in 2009 would lead many to take advantage of a tax cut by shoring up their finances, reducing their debts or increasing savings," said AXA spokesman Steve Folkard. "Britons are waking up to a new financial reality and are adopting a more responsible attitude. So tax cuts may not deliver the expected stimulus to the economy through increased consumer spending. It may be some time before we feel confident about splashing out on the high street."