25 November 2008

Always look on the bright side

I know that yesterday I implied that a reduction in the rate of VAT might not make a lot of difference. And that remains my view.

But don't abandon all hopes of an economic recovery next year. Petrol prices have already fallen substantially; and that will be followed by reductions in the cost of gas and electricity. Meanwhile, assuming that the Monetary Policy Committee continues to reduce interest rates, we may eventually see reductions in mortgage rates. These factors will substantially outweigh changes in the VAT rates.

So, by next year, people may have a little more money in their pockets and some of them may feel inclined to spend it, especially as prices in the shops may be relatively cheap.

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