VAT to be cut by at least 2%!

dirtydog said:
What worries me is that you work high up in the banking system don't you? IIRC? If so it is strange that this all seems an alien concept to you :confused:

I explained in my post yet you either haven't read it fully or haven't understood it :/
Click to expand...

I understand where you are coming from but have tried to simplify it out as much as possible as there is little point going into the finer points of economics when the vast majority of people reading this are laymen.

There are many if's and but's around the idea of cutting VAT. The main problem is there is no guarantee of fiscal stimulus from cutting VAT to 15%. If it is passed on to the consumer, it relies on people spending more money. People are very nervous about spending at the moment - nervous about everything to do with the economy and nervous about job security.

If, on the other hand, business keeps the money and uses it to make sure they don't have to lay off as many staff, we have a case of closing the stable door after the house has bolted. Unemployment is running towards 2 million, not including a great deal who have, over the last 10 years, been reclassified as long-term sick. It may save some money for the treasury and reduce the benefit burden but again, the nervousness of the consumer is the same nervousness being encountered by business. The businessman has then got a choice of whether he passes on the money saved by not making people redundant or keeping a better balance sheet. I feel the latter is more likely.

The reason a cut in income tax will have a greater impact on consumer spending is that it goes straight to the consumer rather than relying on other people to 'do the right thing'. It may not have any impact at all if you and I do not start spending but it at least removes one variable from the equation. The cuts in interest rates do mean that savings are not a worthwhile use of one's funds at the moment so this may help.

I can see your points and outside of a recession you're right but we are sliding into one, the first one where this much information is available to the general populous which gives many many more sources of info to terrify the easily impressionable.
 
I still fail to see how this is going to work, surely it is just postponing the inevitable.

They cut it now so people spend, but when they increase tax to pay it back people will have less money hence spend less.

This really does seem like a bad idea, and as stated it assumes this is passed on to consumers.

The government should be tightening its belt, looking at departments/projects that are a waste of tax payers cash.
 
Booner! said:
Why so far away? when was the last opportunity?... :(
Click to expand...

Gordon is no fool when it comes to elections. He has said he cannot call for an election next year as he must concentrate on geting Britain out of this crisis. Quiet how he will do this when its a global problem is beyond me.

Last election was 2005.
 
As someone who owns a VAT registered business, I feel this is a good idea.

On one hand, it will allow us to reduce prices to those of our clients who are not VAT registered. On the other hand it will mean we have to send less VAT to HMRC. This will enable both our business and our clients to spend more money on other items.

Those saying this will have no benefit to themselves are not looking at the bigger picture at all.
 
Over Clocker said:
Those saying this will have no benefit to themselves are not looking at the bigger picture at all.
Click to expand...

This is a short term fix. Its going to cost the government about about £12.5bn

This money is going to have to come from somewhere, I wouldn't be surprised if after a year or two VAT was put up to 20%
 
Over Clocker said:
As someone who owns a VAT registered business, I feel this is a good idea.

On one hand, it will allow us to reduce prices to those of our clients who are not VAT registered. On the other hand it will mean we have to send less VAT to HMRC. This will enable both our business and our clients to spend more money on other items.

Those saying this will have no benefit to themselves are not looking at the bigger picture at all.
Click to expand...

It's only going to have a proper effect if everyone thinks as you do, and let's face it, not everyone will unfortunately. As much as I hope they do, they won't. Can you also see that you'll get more orders from this? I also don't think this will be significant enough to replace any lost revenue to the treasury.
 
Pilky01 said:
This is a short term fix. Its going to cost the government about about £12.5bn

This money is going to have to come from somewhere, I wouldn't be surprised if after a year or two VAT was put up to 20%
Click to expand...

If it saves billions in benefit bills by staving off a deep recession it might cost nothing at all.
 
Be interesting to see what actually happens to shop prices though.

I remember when VAT went up from 15% to 17.5%, stuff that cost e.g. £2.99 suddenly went up to £3.05. Wouldn't surprise me if some retailers just keep prices the same and pocket the difference.
 
Pilky01 said:
This is a short term fix. Its going to cost the government about about £12.5bn

This money is going to have to come from somewhere, I wouldn't be surprised if after a year or two VAT was put up to 20%
Click to expand...

That's the bit I find scary. I may invest all the VAT saved money I save and put it into an ISA for a couple of years.

If the VAT does go up to say around 20%, I would love to know how long for or being Labour (should they get reelected) keep it at 20% permanently.
 
You must log in or register to reply here.
Back
Top Bottom