Analysis - How much use is a brief, small VAT reduction?

[HEXUS]

The latest government measure to reduce the severity of a recession is to reduce VAT for a year, but who does that help?

Read more.

[iworrall]

I read on the BBC today that the duties on road fuel, alcohol & tobacco will all be increased to cancel out this VAT cut.
Anyone here willing to bet that these duties will be cut when VAT rises once more?

[xenos]

The rises in Duty are permanent, they have already confirmed that.

A 2.5% cut on VAT does literally nothing, unless you want to buy a car and then you will save maybe £340 on a £16K car. But if you can afford the car at the moment then the bit of change back probably wont mean that much to you anyway!

I think businesses will either adjust prices quickly and easily because they can ie. supermarkets and web stores, or if they are less tech savvy or just plain old consumer stores, they will probably leave price tickets the same, just with the final price and pocket the 2.5% difference.

Its a shame that Labour do not fully realise and understand the problem. BORROWING is a massive contributor to the problem we are in now, and they are borrowing MORE to do what? Where we are now cannot be avoided, were here. By increasing borrowing next year to well over £100BN we are literally digging a fat hole. All they can do is patch the hole to make sure it doesn't happen again by putting sensible legislation in place, and riding out the storm.

By the way there are other products now being sold between banks which match in complexity the ones that got the banks into the problem - do they ever learn?

Personally I think Labour know this and are just trying to leave the Tories with as big a mess as possible. Or maybe they really are just clueless?

Cutting stamp duty on houses under about 400K would have been a much better bet, as after all people need to live, and its costing the average person about 20K just to move house so no wonder the market has frozen now house prices have peaked and slipped back.

Brown made a massive mistake by taking house prices out of official inflation figures, inflation has been massive for the last 10 years in reality.

Combined with spreading consumer opinion that borrowing on credit cards and loans for cars etc etc is the norm and that house prices can only ever rise, its no wonder that so many people have got themselves into a state.

As a student I just want to mention that Labour want tuition fees for students to go up from the already horrendous £3,000 a year to £9,000. Accomodation and Utilities are on average in the South East, not inc. London about £3,000 a year too. At the same time they want 50% of children to go to university. They want the average person to have just how much debt? Its a horrendously bad idea to want to put that many people in that much debt at the start of their working careers.

If there weren't 3 different groups of people responsible for regulating our banking sector, (again thanks Brown) then maybe Northern Rock could have been dealt with or maybe it would have never occurred, because like Spain frankly we should have banned the crazy financial products being sold between banks. Please Witness the Spanish bank Santander buying up A&L, Abbey, B&B, whose next!

The Labour Government have systematically made mistake after mistake. Well more specifically Gordon Brown has. I think its about time that he was shown the door.

Just so you know I am a Conservative voter, but don't get me wrong, I appreciate the smoking ban. I do not however appreciate Labour for making a situation MUCH MUCH MUCH worse than it could have been.

We should have been the best prepared and now we are all £17,000 (is that total or more just because of VAT?) in government debt because of the needless tax and spend monster that is Labour and Gordon Sodding Brown.

/end rant

PS. please feel free to correct me if anything isn't right as I'm not quoting any sources.

[Brewster0101]

I read on the BBC today that the duties on road fuel, alcohol & tobacco will all be increased to cancel out this VAT cut.
Anyone here willing to bet that these duties will be cut when VAT rises once more?

Hell no.....

I am for taxes being raised on tobacco and alcohol. There are more than just financial benefits to this and at the end of the day both are strangling this country's teenagers.

Fuel tax increase is crazy, just plain simple crazy. Government knows people have to have fuel, so they've guarenteed this extra money.

We should do what they've done in Thailand and go on a massive protest and storm a major airport. Government is not listening to people, they are just doing what they want at the peoples risk.

[sys-req]

Does the government really think that a retailer will drop the price on a CD from 9.99 to 9.97?

I doubt it, so rather than the consumers benefiting in any way this will just place the extra few pence in the retailers pockets.

And if they raise tax to counteract the VAT cut then the consumer gets stiffed from both sides

Its a smoke screen and a complete waste of time

[cmjrees]

Does the government really think that a retailer will drop the price on a CD from 9.99 to 9.97?

£9.99 inc VAT / 1.175 = £8.502 ex VAT

new rate 15 %; £8.502 * 1.15 = £9.78.

This cut in VAT by 2.5 PERCENTAGE POINTS (not %) will cause a fall in prices of ~2.2%.

The thing that concerns me, is that retailers who don't drop the price now will later raise the prices once the tax goes back up.

[3dcandy]

seems strange to try and help retailers on a day when it appears that 2 are to go to the wall....and I thoroughly expect that the 2.5% VAT cut won't be passed on by most retailers

too little too late springs to mind

[kopite]

The thing that concerns me, is that retailers who don't drop the price now will later raise the prices once the tax goes back up.

Thats my concern too.

Some places have even put prices up this week.

The DSLR I got off amazon last week for 242 is currently selling for 265. Now there might be a valid reason for the sudden price change this week.

[Sinizter]

This is an utterly useless measure. It will not encourage spending. There are other price increases on top of this non-event that will make life in general more expensive.

And we havent even got to the 18.5% VAT that the slimeballs are planning on bringing in a few years. Just because he left it out of the current report doesnt mean that the plan has been shelved for good.

[simoncmp]

I guess the government is missing the point, i.e people are not spending because they don't have the money. Reducing prices by a miniscule won't help as the money is not there in the first place to spend.

[kopite]

I saved a quid on my dedicated server this month lol