Will this work?

Yesterday, Chancellor Alistair Darling unvelied his rescue plan for the British economy.  The miracle oil that is to set the wheels in motion again is a cut in VAT from 17.5% to 15%.  Will this work?  Well, it will give everybody a few more pounds but is it enough to make us trust the ‘system’ again or will we continue to sit on every penny we can lay our hands on?  I think so because we are still to see the full consequences of the credit crunch.

It is also interesting to see this in the light that business activity needs a serious boost. Especially small businesses who struggle both because large businesses seem to delay payments to small businesses that can’t do anything about it, and also because banks (finally having learnt from the past) now deny overdrafts and ‘survival type’ loans, etc.  But won’t it also mean that scarce resources need to be spent on changing business procedures?  Will the VAT reduction be spent on the implementation of this?  On adjusting and adapting financial systems.

Yes, it is easy to be critical and I couldn’t have done better but I would really have liked to see this propped up with a promise that all will be done to avoid this happening again.  And how this might be done.  Because isn’t it a lot to do with lack of regulation?

Enough of this scaremongering.  There are things that can put a smile to your face.  The Christmas lights are coming up in Edinburgh and even if the presents will be much smaller this year, isn’t it all about family anyway?

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3 Responses

  1. I think the simple answer to “will it work” is that nobody knows. Having listened to so many “experts” on the subject I think we can just be optimistic and hope that it does. I think it does no one any credit to condemn it out of hand ,and wasn’t it “experts who put us there in the first place?
    As you say family is the most important thing and we should count our blessings that we don’t live in a wartorn country. God Jul!

  2. Dear Anne,

    Thanks for yruo comments, yes we’d better hope for the best but somehow it does seem too little too late. God Jul to you as well.

  3. For me at least, the biggest concern is the fact that sooner or later we will have to pay for this VAT cut. The 5% raise on income tax for high end earners will generate around £1.5 billion a year, so it will take just a measly 10 years to cover the deficit created in a single year! The government have already been forced to admit they were ‘considering’ raising the VAT rate to 18.5% in 2011. There is real reason to suspect the government will go ahead with these plans at some point – not only because they would generate an extra £5 billion a year! Add to this the fact that NI contributions will rise for everyone in 2011 as well, and you start to wonder if the government even realise there is a recession on….
    [Shameless Plug:]
    I cover this topic and the whole VAT Rate Change topic on my own blog http://vatratechange.co.uk – I’d love to know your oppinion on what I’ve been saying – I’m not an expert by any stretch of the imagination, I’m just putting 2 and 2 together and realising the government is putting together one giant scam!

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