FORMER chancellor Ken Clarke has said the Government should slash VAT to help people pay their bills.

The Notts MP suggested a temporary cut in the tax, meaning the Government might lose some revenue for a short period, would be an effective way to help the man on the street.

"It would have to be temporary because public finances could only take a short-term hit," said the Rushcliffe MP.

"There is going to be a big drop in consumer spending, and a cut may encourage people to buy something which they otherwise wouldn't have."

But the suggestion, which he first made in a Commons debate on Monday, seemed to be at odds with an announcement by Tory leader David Cameron, who said there should be no "uncosted" tax cuts.

Mr Cameron proposed £2.6bn worth of tax breaks for employers who take on workers who had been unemployed for three months or more.

He said the scheme would be cost the Government nothing because savings would be made by having to pay out less unemployment benefits.

Mr Clarke said: "They are alternative ideas, but the one thing they do have in common is that some form of tax relief is needed. If you can afford those cuts then that is desirable."