Friday, June 17, 2011

One for you-know-who.

David Prosser: A VAT cut is worth it – even for those who worry about the deficit

For those who believe the deficit is the absolute priority for economic policymakers, the call by Ed Balls yesterday for a temporary cut in VAT was never going to play well. Predictably enough, within hours both David Cameron and Nick Clegg were rubbishing the proposal in terms with which we are all now familiar – "maxing out the nation's credit card" and so on. That's a pity because the thing about cutting VAT is that we know it works – and it will not cost anywhere near the theoretical £12.5bn price tag of a 2.5 percentage point reduction in the standard rate.

Posted by sibley's b'stard child @ 12:29 PM (1759 views)
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4 thoughts on “One for you-know-who.

  • Superted187 says:

    “Cut VAT so people spend more money on imported crap from China”

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  • mark wadsworth says:

    Agreed, if you factor in all the increases in other tax receipts and welfare savings which would result and take a mid-estimate of each, it looks like hiking VAT from 17.5% to 20% would only improve govt finances by £0.8 billion.

    Or if you are a total optimist, it might improve government finances by £6 billion or something, but certainly nowhere near £12.5 bn.

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  • We have them on the run Mr Mainwaring.

    Go Iceland, Greece.

    The fraud is being revealed. Bring out the nice cops.

    Techie, what happens to American banks ‘when’ Greece defaults. LOL

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  • @1 VAT was already raised back to 20% on 4st January, after a period back at 17.5%, did you not notice?
    See: http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-increase.htm

    I disagree.

    VAT has the advantage that all UK residents have to pay it on less essential goods, so it seems fairer.

    Each VAT change can cost sellers serious money, given the logistics of repricing many product prices both virtual and physical at many sites, so it would be stupid to change VAT again without good reason.

    IMHO it would be far better to raise the untaxed salary allowance to help workers, especially the lower paid, and help employers to attract workers more easily; it is actually an advantage that this only helps those who are working.

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