17 June 2011

It's not balls

Is a temporary cut in VAT, as advocated by Mr Balls, a bad thing? The Independent thinks not:
... a temporary cut in VAT was exactly the policy pursued during 2009, when the UK was mired in recession. Despite widespread prior scepticism about its effectiveness, the figures show that it did have a very positive effect.

According to analysis from the Centre for Economics and Business Research, an independent think-tank, consumers spent as much as £9bn more than they otherwise would have done during the 13 months for which the VAT cut ran. As a result, retail sales growth accelerated during the downturn rather than collapsing.

All of that extra spending was VAT-able, of course, so the net cost of the reduction was significantly smaller than expected. And that's before one starts to count the wider economic benefits – retail jobs saved, for example – of the spending, which will have produced additional tax revenues.

Not that Slasher Osborne and his little chums will care - they will persist with the masochism strategy. If it's not hurting, it can't be working.

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