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So do you think the VAT cut has helped in any way during the recession?

As most of you will be aware, do any of you think the VAT cut from 17.5% to 15% until the end of 2009 has helped consumers in any way, shape or form? What was the point of it in the first place....personally I think it was a waste of time....prices are still the 'same' so the extra 2.5% goes towards boss' profits and the average consumer is unaffected so consumer spending doesn't increase.

Income tax reduction would have been more effective I reckon.

Any opinions?

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Reply 1

uthinkilltellu

Someone will have to pay for it. Most likely us.

Reply 2

ArtGoblin

It was a nice thought...

Reply 3

PorcineAviation

Almost as catastrophically stupid as letting Lehman fail.

Reply 4

yodude888

No - it's not a drastic enough cut to affect any individual consumers' decisions at all. However, it must have really hurt the government, who will see less tax earnings.

Reply 5

Blondie02

VAT cut was pointless. i know they thought adopting some sort of expansionary fiscal policy would help us out of a recession, but really, its done nothing but waste time and resouces having to change prices.

and ultimately we will be the ones paying it back!!! when good old eyebrows puts it even higher than 17.5% in a few years...

Reply 6

Xenomorph v2.1

2.5% made no difference to me to be honest. But it's better than nothing I guess.

Reply 7

cv711

The saving is not actually 2.5%, its 2.5% of the final price so its like 1.??%. Waste of time in my opinion.

Reply 8

uthinkilltellu

ArtGoblin

It was a nice thought...

I liked the ribbons too.

Reply 9

devan5

most of the stores i go at only have VAT cuts on the popular items. what is the point of a VAT cut if its not everything. :mad:

and as far as the future, i think the government plans on making back the money they've lost, its probably going to be something like 18.5%

Reply 10

Lachlan

If such a thing was to work the tax cut would have to be far greater. 2.5% is simply too small a amount to make any noticeable difference.

Reply 11

sul

i would've preferred an income tax reduction of the base rate from 20% to 18%, would've been more effective as it is a 'visible' tax unlike VAT.

i see the tax rate heading one way under the labour gov ... upwards. and under the tories : the same, but with sh***er public services than they already are!

Reply 12

Haz313

I'm guessing it worked better in theory tbh

Reply 13

uthinkilltellu

sul

The govt is trying to stimulate spending in a downward eceonomy. Cutting taxes is suboptimal in so far that people might/probably will save the tax-cut gain rather than spending it now.

Reply 14

username33685

the cumulative effect of a 2.5% reduction in VAT over a year would equate to you having a few hundred quid left over compared to if you purchased the exact same things the previous year. the government hopes you will use this extra money to consume more, which helps the economy. but i guess you can't easily see if this has the desired effect

Reply 15

gyyy2807

Don't think it has helped. If you're worried about your job, you're not going to start spending just because some items are a few quid cheaper.

Reply 16

President_Ben

Yes, a little.

More than most people on here think.

Reply 17

Chewwy

has it increased retail sales by more than the 1.x% price cut? almost certainly, what with all the media attention it got.

and even if it didn't increase volumes dramatically, it's a nice gift to retailers who are facing a hard time.

sul

Income tax reduction would have been more effective I reckon.

justification??

Reply 18

ElemenT'

yodude888

No - it's not a drastic enough cut to affect any individual consumers' decisions at all. However, it must have really hurt the government, who will see less tax earnings.

This.

Reply 19

Quady

It also needs to be born in mind this policy should act as stimulus in the month before it gets raised again, buy before things are a little more expensive.