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About LinkBacksIf VAT is cut 2% who will find the time to buy themself that new extra bit of hardware they wanted? etc
If VAT is cut 2% who will find the time to buy themself that new extra bit of hardware they wanted? etc
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About... 75% of retailers (all areas, not tech, obviously) probably won't know how to reprogram their POS machines with the new VAT amount.
I reckon if they cut VAT it'll end up costing us more.
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Prices will stay the same, they'll just make 2.5% extra profit
I am taking prices down now for the laptops I am looking into buying and if they don't drop in price I will demand it!
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2% though isn't to much. If you were going to buy something that cost £200 it would know cost £195.
I suppose if you were going to buy something big but i don't think its going to make a big difference
It doesn't really seem like a sensible solution to me...
http://news.bbc.co.uk/1/hi/uk_politics/7744273.stm
Reduce VAT so more people spend - isn't the problem that people don't have money in the first place and are spending money they don't have? (on credit cards, loans etc). The amount of debt this country is in already is shocking, if they put the country in more debt, it's going to be us that end up paying it through higher taxes.
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If they cut VAT by 2.5% it won't really make much odds if you're looking at spending several hundred on upgrades... even if you spent £1000 it'd be £25 off, joy!
In short, although a VAT cut is welcome, it won't make me buy anything I wasn't going to anyway.
Well the TV I want would drop a whole £29 to £1300.
So no, I don't think it will encourage me to buy more stuff.
It's not going to be the conscious and obvious decisions this will affect. Everyone won't be going out and buying an extra 32" LCD TV. It'll be the the 'I have enough to buy that 3 pack of socks', I have enough to get the Extra Special / Organic alternative to what I normally get.
I expect none of us will knowingly think we're going to spend more, but over the whole economy, it will obviously encourage more shopping.
So they cut VAT to get people spending again, and then in a couple years stick it back up again to make the money back and we are in the same boat all over again?
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Basically, yes.
Gordan Brown has been spending huge sums of public money in the good times, which means there is little (read: None) left now because he was convinced there wasn't going to be the 'boom and bust' cycle we've seen in the past (http://en.wikipedia.org/wiki/Boom_and_bust).
Now the bust is in full swing, he's turned for cicle saying we should save money in the good times and spend it in the bad times to help boost the economy. The idea being the economy keeps it's self floating in the good times and the government can horde enough money to see it through the next slump (this being someones elses theory whos name I forget).
Which in practice, may well be fine... however given we have no money and he is still spending, it just means when the good times start picking up again in a few/several years the UK will be crippled by huge debts and in turn, huge taxes.
(My understanding in a basic round-up)
I really hope he looks at a japan, and the problems of the 90s, before deciding this is something we simply spend our way out of.
But a 2% cut in VAT, that is just moronic.
Why not give every single person a rebate via PAYE?
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All the opposition parties have been bashing have for this, but is there really better solutions? There seems to be some assumption that the government is just moronic, but if someone told them a better solution, surely they would use it?
If you aren't correct, I'll eat the slightly cheaper hat I'm about to buy.Originally Posted by kalniel
Prices will stay the same, they'll just make 2.5% extra profit
++ to the last two posts. *EDIT* The two before Fran
He was an idiot as a chancellor, he's a bigger idiot as a stand-in prime minister. I seriously feel sorry for you guys. 2009 can't come soon enough.
You might want to rethink that.
My advice - if you're going to buy one, as opposed to just wanting it, wait for that VAT cut to take place and jump in fast.
Why? Exchange rates.
The VAT cut, if it happens and is at the much-rumoured 2.5%, won't make a huge difference, but exchange rates have suffered badly in the last few months and while that hasn't quite fed through to street prices yet (though it's started), in my opinion, it will, and is just a matter of time, am not much of it.
So even though the drop in VAT, while nice, wouldn't change your buying decision on a £1300 TV (or at least, it wouldn't change my decision), avoiding a potential £400 price rise due to exchange rates collapsing would certainly get my attention.
As for whether this would make me spend more, yes it will. Because I've been expecting something this this, and expecting some impact on VAT. I've had plans for new kitchen, bathroom and double-glazing right through the house on hold in the hopes of this, and it'll go ahead as soon as that rate change kicks in (assuming the rumours are right).
But I would point out, this isn't me spending money I wasn't going to spend. It's me finally spending money I've been holding off spending, and have deferred in expectation of this. And on what it's costing, yes I'll be glad of the VAT bill dropping. It'll pay of another chunk of my already small mortgage. So for that, thanks, Gordon.
But will it work as he hopes? Economically, I doubt it. But in my opinion, his main reason is a political gamble. In the absence of the funds to pay for it, Cameron is dead right, it's not a tax cut, it's a tax deferment, and taxes will have to go up "in the medium term" to pay for it.
Anyone know the political (as opposed to economic) definition of "medium term"? Well, try "after the next election".
In my opinion, while there's some economic grounds for this and it might (or might not) work, the price of trying to mitigate the depth of the recession now will be slowing and prolonging the duration of it, and hampering the recovery, because those tax rises will clobber us "in the medium term".
And it might not work. People might (and in my opinion, will) stick much of any tax cuts under the mattress for a rainy day, and if that happens, we'll have seen debt go up, unemployment not benefit, almost certainly further interest rate cuts and very likely, even further damage to the exchange rate. And as those exchange rate impacts we've already seen feed through, many prices (for imported goods) will go up, buyers will stop buying, shops will suffer even more and more jobs will be lost.
Brown is just hoping that that won't happen until after the next election, and in that calculation, he might well be right. And if so, on his criteria, it'll be a raging success. On my criteria, the PM (stands for Principal Muppet, by the way) will have "assisted" us to get out of the hole he personally dug for us by issuing us all with shovels, and instructions on how to dig .... otherwise known as his "borrow to spend" philosophy, because that's what these tax cuts amount to.
So much for "abolish boom and bust". What an incredibly fatuous claim to make.
And what did the PM say when challenged on that? He claimed he didn't say he'd abolished boom and bust, but that he'd abolished Tory boom and bust. Oh well that's all right then. All those losing their jobs and getting their houses repossessed will no doubt have theirs hearts warmed in the knowledge that it's a nice, cosy friendly Labour "bust", not one of those horrible Tory ones. And that especially crass attitude of his is a prime example of why our PM (Prime Minister) is our PM (Principal Muppet).
aidanjt (24-11-2008)
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