VAT reduction.

In message , Ret. writes

It seems that even Joe Public can see that this one is unlikely to work. Massive borrowing well in excess of what is being pumped in as we are already in a mess and he thinks we are in a position of relative strength. Talk about cloud Cuckoo land.

Yeah, but from the other threads, it might help business - not the smallest non-vat-paying ones, and certainly not the least well off.

well it will make the shops another 2.5pc profit, ops wrong group of people

In that case he should have increased VAT to 20%. Makes virtually no difference to spending habits, but will make the goverment £12bn instead. And makes VAT a lot easier to work out.

In message , Bartc writes

Not as daft as it sounds, and he could make it 50% on alcopops and fizzy lager if he likes.

I found it intersting that he had the power to reduce VAT at all. I it was set by the EU.

Robert

# More like Alistair in Wonderland.

The minimum is, which is coincidentially 15%.

I never quite understood why, though, as I would rather it was abolished and the loss made up from increased income tax.

Neil

EU countries have to pay VAT but each country gets to set its own rate. Most have Reduced and standard Rates and these can be found at

The average standard rate is 19%, the highest is 25% (Denmark, Hungary and Sweden) and the lowest is 15% (Cyprus, Luxemberg and soon to be UK) so even before the reduction, VAT was still low compared to Europe as a whole.

Frankly, I do not believe this will increase spending to any great extent, and I doubt that traders will pass on the reduction as they will raise the basic price of the item to boost their profits.

If the Government really wants to encourage the public to spend, then he needs to set the maximum Interest rates that people must incur on Credit and Store Cards as even though the Bank of England Rate is at record lows, credit and store card rates are actually increasing.

Simon

I found it intersting that he had the power to reduce VAT at all. I it was set by the EU.

Robert

Thats not a bad idea, fix two problems at once.

the drunk yobs and the slight lack of money....

It's not designed to help Joe Public, it's designed to help businesses.

Not a single business will reduce their prices accordingly (see another thread about chinese takeaway prices, for example). So, by definition, their profit margin has just increased by £2.50 for every £100 worth of business they do.

The last thing the Government wants is another 750,000 unemployed all claiming shedload of benefits........the VAT cut will (the Chancellor hopes) stop that from happening.

Alcopops and lager are not the problem. Cheap wine is the beverage that needs to be taxed more highly.

Amazing that I can buy 5 litres of cheapy wine in a plastic barrel in EastEnders Calais for under £4 and yet I don't have to clamber over gangs of marauding French teenagers to get back to my car.

Try another reason for badly behaved British teenagers.........

As indeed such rates should.

Because it went on so long, the correction will be painful - but it can't IMO be a bad thing for us to return to the days of saving for large purchases and spending within your means?

Neil

PC World already have reduced their prices accordingly.

I expect a lot of businesses will have to reduce their prices, either now or later as competitive pressures in a shrinking economy will force them to do so.

Such a transition is not made any easier by the requirement to pay back the accumulated debt in addition to paying for 'now' and saving for the future.

Especially when the Government is doing the same, well they say that they will be in 2010 except that they will probably not be saving for the future based on their previous record but they will be expecting us to pay back their debt.

In message , Craven Moorhead writes

Badly behaved parents?

Very good.

History will look back on this time and cite bad parenting as the cancer that killed socially acceptable behaviour.