A massive price war has broken out among Britain's leading retailers as they scramble to pass on this week's VAT reduction three days early.

Alistair Darling's cut in VAT rates, from 17.5 per cent to 15 per cent, is not due to come into effect until Monday. However, most big retailers are trying to cut prices before then, partly for fear that Britain's high streets would be deserted otherwise as shoppers hold back.

News of the moves came as it emerged that Marks & Spencer is to hold at least one more day, and maybe two more days, in which all stock in its stores is reduced by 20 per cent. The Times understands that M&S has pencilled in December 4 and December 11 for the “spectaculars” after the success of last week's exercise — which saw queues at tills in many M&S stores. M&S refused to comment last night on its plans, but Kate Calvert, a Shore Capital analyst, said: “If they were to have another one, it would probably be a sign that they have excess stock.”

There were growing signs last night that technical difficulties of putting in place the VAT cut has thrown retailers into disarray. Deloitte, the accounting firm, said that its VAT helpline was receiving 30 calls an hour. Asda said that changing prices on the shelves of its 356 stores would take 100 man-years and that adjusting to the new rate will cost £10 million.

The Treasury has admitted that the total cost to the UK economy of the 13-month cut in VAT to 15 per cent — and restoration to 17.5 per cent in January 2010 — will be £300 million. Costs, outlined in Mr Darling's Pre-Budget Report, include “familiarisation with the changes, re-pricing, book-keeping and accounting checks and system changes”. About £175 million of costs will be run up in the current tax year and a further £125million of costs in 2009-10.

DSG, the owner of Currys, Britain's biggest electrical goods retailer, was the first to cut prices to take account of the VAT reduction ahead of schedule.

Tesco, Sainsbury's and Asda, the supermarkets, were also quick off the mark — with all announcing aggressive price cuts at the same time.

Tesco said that, while implementing the cuts, it would reduce prices on 1,000 products by up to 50 per cent. Richard Brasher, Tesco's commercial director, said: “We know that many families will start their Christmas shopping this weekend as pay packets arrive and we don't want customers to miss out on the cut in VAT.”

Gwyn Burr, customer director for Sainsbury's, said the VAT cuts would be in place from Friday morning. She added: “Since our announcement on Monday that we would pass on the full benefits of the cut in VAT to customers, we have been working hard to implement the new lower rate as early as possible.

“This is great news for shoppers because, in many cases, the rate cut will be in addition to discounts that have already been applied to everything from TVs and toasters to DVD's and laptops.”

Asda's chief executive, Andy Bond, pledged “thousands” more price cuts from last night — promising to sell all televisions and DVD players VAT-free tomorrow, Saturday and Sunday.

Other retailers also rushed to respond after a meeting on Tuesday night of industry players — including Marks & Spencer, Sir Philip Green's Arcadia group, and Next — to discuss how they might co-operate on the VAT reduction. They said last night that they would start to apply price reductions “on, or as soon after” Monday as possible, allowing for the complexities of implementing the changes.

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