Would you trust these people to run the country?
So the chancellor announced a cut in VAT from 17.5% to 15%. Supposedly to kickstart the economy, but it's obviously a pointless wast of time and effort.
It's going to have no real effect: shops in the UK don't advertise an untaxed sticker price and then add tax at the till. So the sticker price - which is largely rounded to a convenient looking number such as 99p - will largely be unchanged, so consumers won't benefit.
It's going to be a nightmare to implement. Businesses are going to have to redo all their finances. And in the unlikely event they reprice, that's going to require effort they won't want to do.
Consumers aren't going to notice any difference, so this isn't going to lead to an increase in consumer confidence.
Not only that, but attempting to reduce prices at a point when inflation is already falling isn't exactly gong to stabilise matters. And then there's the 2.5% increase to kick everyone in the teeth at the end of 2009.
And the counter to this is an increase in taxes on income. So everyone sees the money in their pocket going down (again) and simply responds by cutting back on spending.
So, these changes will at best be completely pointless, and are likely to seriously harm the economy.
It's clear that what should have been done is to reduce taxes on income. In addition to the direct stimulus to the economy, people actually get a positive feeling from having more cash in their pockets.
