Tuesday, 23 December 2008

Emperor Browns new Clothes

First the Germans said, it now the IMF have followed suit Far from being the saving of the British economy the VAT cut is looking more and more like the Emperors new clothes.

But should we be surprised, while the big retailers are happy to pass the savings on what about the rest of the economy.

The publican running a microbrewery "I cant afford to change all my menus and beer prices are actually going up, the duty change over cancels the cut in VAT and that is permanent"

The small builder (and the haulage sector) "increases in fuel duty mean we are paying more not less tax and we cant claim that back"

Hotels personal experience "none of the hotels I use on a regular basis have changed their prices so all this means is margins going up"

Sure I have saved some money as a result the vacuum cleaner we needed to buy was £3 less but I saved far more by shopping around for the Children's presents than I did from VAT changes.

So where are we left, in 373 days VAT will return to normal and if the commentators are to be believed we will still be in deep recession. Potentially worse the rise may even create a double dip scenario with firms either forced to cut margins or see a further hit to spending.

We need confidence back by that point if we are to survive.

So is it working? Just look to the high street today

The Officer Club : up to 70% off

HMV: 2008 chart albums 2 for £10

B+Q: 50% off sale starting tomorrow on bed, bath and kitchen furniture

Adams: savings on everything bar the spring 09 collection

Waterstones : large range of 3 for 2

The sales have started and it isn't even Xmas eve. Compared to this the Chancellors offering is an expensive red herring.

Then look at the queues the bigger the cuts and the cheaper the branding in any case the bigger they were, The Works, Primark, Waterstones were all busy. In short shoppers were trading down and again by far more than 2.5%.

Now the figures in January will tell their own story as no doubt will be the number of businesses in receivership but now is the time for the Chancellor to be bold.

If the stats show the VAT cut isn't working it should be reversed immediately. With the money saved he should.

Invest in insulation of all public buildings.

Underpin the housing market by purchasing vacant property across the country and use it to reduce council housing waiting lists and homelessness.

Initiate further investment in infrastructure modernisation across the UK.

If the chancellor thinks getting the public deeper in debt for consumable items is the way out he is little more than giving whiskey to the dunk on the street corner. We do need to spend but we need publicly visible signs of our investment to build confidence in the rest of the economy not just a cheaper wii to fill our days while we sign on and look for a non existent job

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