VAT are you doing, Darling?
Well, as predicted by all and sundry over the weekend, Chancellor Alistair Darling (yeah, like it was really his decision) has reduced the rate of VAT by 2.5% to 15% in an attempt to bankrupt the country.
Sorry, that should read in an attempt to kick-start the economy and pull the country out of recession.
The rate cut, introduced on 1 December, is to last until 31 December 2009 and is supposed to get everyone to spend their way out of recession. But are people really going to fall for it? How much are people really going to save?
Well, for something that currently costs £100 including VAT, the new VAT rate would bring it down to £97.87 - a massive saving of £2.13. For something that costs £1,000, the new price would be £978.70 - a saving of £21.30. Not really enough to tip you over the edge and make you go and buy the item. Let’s face it, if you can’t afford it at £1,000, you’re not going to be able to afford it at £978.70.
And that’s making the assumption that the prices change, anyway. The majority of your grocery shopping doesn’t have VAT anyway, so that won’t change. Your gas and electricity won’t change, because they attract VAT at a different rate. Fuel won’t change, as the duty on fuel has been increased to compensate for the drop in VAT. The same with alcohol and tobacco. Your mortgage payments aren’t going to come down, because there’s no VAT on them - and the interest rates are now less likely to fall again. Basically, most of the money that comes out of your pocket is going to be unaffected and you’ll be no better off.
For those products that do attract VAT at the standard rate, the Chancellor has said he hopes that manufacturers will pass the saving on to consumers. I think Mr Darling is going to be disappointed and I think that the majority of businesses won’t be doing that. January is typically the time when prices go up in many industries; what many businesses are likely to do is to say, OK, VAT has been reduced so we won’t put our prices up this year and they’ll maintain the status quo. Other businesses that wouldn’t necessarily be about to put their prices up are going to be unlikely to want to splash out on new catalogues, leaflets, etc - perhaps junking thousands of pounds worth of existing ones in the process - for a temporary reduction.
Basically, the costs that many small businesses would incur in passing along the VAT reduction would mean that they’d be forced to put their prices up, to a level probably greater than if they just leave them alone.
And it’s a logistical nightmare, too. Because of the knee-jerk, headless chicken, panic mode that the Government are in, the Chancellor has given businesses one week’s notice of the change. The work that is involved for most companies would usually need months of planning to get right and to roll out properly. So it’s not going to happen.
The only thing that Mr Darling and Mr Brown have achieved with this emergency Budget is to put the country billions of pounds in the red, and given us all a year’s notice that come 2010 things are going to hurt a lot worse financially than they were hurting before.
GB plc : Closing down sale now on, everything must go
Seems like Alastair Darling and Gordon Brown are well into headless chicken mode over the current state of the economy. In a panic-stricken attempt to get the country out of the recession that we seem to have talked ourselves into, they are about to announce tax cuts galore.
Trouble is, the public coffers are going to go at least £100 billion into the red next year to pay for it so when (or rather if) the country does ever come out recession, taxes are going to skyrocket to pay for it all and we’ll all be far worse off than if they just leave things alone now.
Of course, all of these tax cuts have got nothing to do with the fact that Gordon Brown is expected to call an election next year….
At it once again
Leading on from my recent posts about data security, both nationally with the UK Government and internationally with Facebook I’m now getting somewhat jaded about the whole subject; it seems that almost everyday there’s some new story about data being treated irresponsibly some Government department that’s supposed to be looking after it.
Today we’re treated to two cases; the first is a little less HMG’s fault as it involves the theft of a Royal Navy laptop with details of around 600,000 people. Chances are, though, that as it was left in a parked car the thief wasn’t after the data, he just wanted the laptop to sell for drug money.
The second case is more serious, as it involves confidential documents from the Department for Work and Pensions being found on a roundabout near Exeter airport. Three things about this story are worrying; firstly that these documents should end in this place, secondly that similar documents were found in the same place only a couple of months ago and thirdly that no-one seems to know who should have been in control of the documents at the time they went missing.
I’ve asked this question before, but I’ll ask it once again; how can a Government that systematically and regularly fails to protect the data of its citizens, either through its own ineptitude or that of the outside companies it chooses to employ, really expect to be taken seriously when it says it can be entrusted with the type of data that its new ID card scheme will require?
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