'Let us give cash back at tills instead of cutting VAT'

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Stores will spend £176.5 million this year rushing in the cut to 15 per cent. Then they will have to spend another £127 million in 2010 when the rate reverts to its usual level of 17.5 per cent.

The bill for red tape and repricing was disclosed in an "impact assessment report" carried out for the Treasury and released last night.

A High Street rebellion was growing today, with senior retailers privately asking the Government to allow them to leave prices as they are and give people a discount at the tills, to save the expense of reprogramming tills and computer systems for 13 months.

One senior retailer told the Standard: "I don't think anybody will be able to afford to change their systems for the sake of a year-long cut in VAT. But we could make a simple adjustment at the till that would ensure the customer gets their discount and the Government gets its money."

The actual saving for a £1 item would be 2.13p, meaning that baskets of goods would have to be rounded up or down to the nearest penny, and separate calculations would be needed for goods that are levied at five per cent VAT.

Some retailers say they will leave prices as they are and use the VAT cut to fund promotion schemes to boost sales.

The Treasury assessment says business will need to spend £24.5 million this year on "familiarising" their staff with the change, plus £50 million on repricing, £27 million on extra accountancy checks and £70 million changing their systems.

A spokesman for the British Retail consortium said most firms would be able to absorb the costs without a problem: "Yes, it is a lot of money but retailers support the principle of what the Chancellor is trying to do and they will absorb the costs."

A Treasury spokesman said firms saw the cost as worthwhile. "Clearly the benefits to the economy and businesses of a £12.5 billion reduction in VAT massively outweigh the cost of implementing the change. This will be good for the economy but also good for the UK's 4.3 million businesses who, to the extent they pass on the reduction, will see increased sales."