VAT cut latest

The lights have been on all night at the Treasury, where calculations for Chancellor Darling's next steps are being processed in large spreadsheets. The word is that VAT may be reduced along with some other measures.

A VAT reduction from 17.5% to 15% would remove the "temporary increase" made in 1991 to compensate for the Poll Tax debacle. Thats a reduction on a £9.99 VAT-ed item to an amazing £9.87, which I somehow think gets lost in the noise.

Such a reduction of some 2.13% in the price of an item requires spending of £469 a week on VAT-able items (eg not food) to save £10. It may chop cash from the Exchequer, but it doesn't make a lot of difference when even a £600 telly would still be £587.23 after the adjustment. The £13 is probably not the dealbreaker.

Let's try 12.5% VAT, a reduction of 5%. That's more of a 'UK Economy Winter Sale' level, but still requires the traders to pass on the savings, rather than have reasons to somehow round up ticket prices. That £9.99 becomes £8.50+1.05 = £9.55. When retailers are already knocking off 20% in pre Christmas sales, the 45p does not seem all that exciting.

How about a present? A Christmas Xbox would make an interesting example: A few weeks ago they were £169, then all the retailers passed on the manufacturer reduction which saw the price drop to £129 - forty quid less. A VAT reduction of 5% (ie to 12.5%) would take another circa £6 off of the price. Not enough to even change the second digit - £129 becomes £123. Hmm.

Having just flitted through Heathrow, the effect of pseudo 'No VAT' is more pronounced. The same item would become around £109 - see tourists buying up cheap items in the airside stores.

I suppose in the absence of a December VAT holiday, we will have to find other ways to amuse ourselves with the remaining banknotes.

cut price designer gowns from the financial pages

Today's papers are all full of stories of retailers' sales in the run up to Christmas. The M&S one day 20% Sale seemed to provoke the headline although the journalists took the easiest route to reporting it as further signs of doom and gloom.

I listened to Sir Philip Green (He of Arcadia & BHS) this morning and thought he expressed well the retailers' talking up of the situation about giving customers something and owing it to staff and the economy to try to keep things running. Its good to hear some positive spin alongside all the negatives.
The deregulation of money markets ten years ago (Chancellor Brown, by any chance?) allowed banks to gamble twice the prudent level of debt creating much of the current deficit.

Another high street retailer was front paged as on sale for one pound today and further illustrates the cavalier consequences of captains of industry rewarded with multi million bonuses last year who looked the other way whilst the bad betting occurred.

I'm sure Gordon can't just be deflecting attention from his own part in the deregulation, blaming America, attempting to gain tacit international profile and coming up with some pre-election giveaways? Surely not.

one dot fifty

All that money we're throwing into the economy seems to be worth less every time I look at it.

If Gordon threw in £200bn, it was worth $400bn around a month ago.

Now its worth $300bn.

That's another $100bn that has disappeared in a matter of weeks, yet we are not supposed to talk about it.

No wonder I need one of Linda's excellent cushions to rest my confused head.