It is estimated that the change will cost the Treasury around £12.5bn, while it will save the average earner around £170 a year.

It is estimated that retailers will face a £300m bill over the coming two-years as a result of the reduction as they have to change price tags and accountancy systems.

A report to Wirral Council’s cabinet said: “The scale of charges for car parking is such that any ‘pence’ changes would create difficulties for those paying in terms of the correct money and the technology, which is based upon coins of a 5p minimum.

“Car parking charges are subject to regular review and consultation.”

The report said based on current income levels and charges the decision “will result in the Council benefiting from the VAT reduction by approximately £110,000 over the period (being £35,000 2008/09 and £75,000 for 2009/10)”.

Tory councillor Chris Blakeley slammed the decision, saying he could understand some of the difficulties in reducing all prices with VAT, but added: “While the council is overcharging for VAT then on every £1,000 it receives it makes an extra £18, while at the same time proposing to slash services.”

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