BBC reports on the criticism by the IMF on the UK VAT cut.
An International Monetary Fund (IMF) economist has criticised the UK’s 2.5-percentage-point cut in spending taxes.
Olivier Blanchard, the IMF’s chief economist, said that the temporary cut in VAT would not significantly influence shoppers’ behaviour.
Has the 2.5% cut in VAT made an impact on consumer spending? When you consider the 20-50% reductions we are currently seeing on the high street, will a 2.13% cut on prices as a result of the 2.5% reduction in VAT actually make a difference?
If an £117.50 iPod is now just £115.00 will saving £2.50 make me go out and buy one, more than likely no!
However the overall savings I make across buying stuff with VAT may allow me to spend more.
Though problem is that most of the stuff people spend their income on, food and mortgages, don’t have VAT!
Interesting to see if the cut has any effect whatsoever.