Comments on: VAT cut confusion redux

By: TMJ

TMJ — Tue, 25 Nov 2008 14:40:15 +0000

Actually, unless I misunderstand things, the VAT increase means an increase in transport overheads. Companies can claim back VAT on fuel, but not fuel duty, so the effective price they pay per litre has actually increased by 2p per litre.

By: Laban Tall

Laban Tall — Tue, 25 Nov 2008 07:47:46 +0000

I don’t know why Brown didn’t reverse a Tory tax rise (introduced at a time when they were scrabbling for revenue themselves) and remove VAT from building work (it’s levied on all improvements – everything except new build).

It would help the builders – and people usually have to buy things to go in the extension/loft conversion. Plus, bricks, plasterboard and mortar are some of the few things we still produce in the UK.

By: Clive

Clive — Tue, 25 Nov 2008 07:03:38 +0000

The government’s response to the meltdown has been a continual process of spin and spin again. The bailout to the banks was originally sold as getting the financial system moving again. But then it turns out the billions were merely to stabilise a near terminally ill patient, not to help them lend us more money (which is probably a good thing, cheap and easy credit is part of the problem). Now the VAT cut which was spun as helping us the consumer, but more realistically will maybe help the small retailer who won’t pass the cut on. Oh, and printers who’ll now be getting orders to print loads of invoices with “includes VAT at 15%” to replace all those refering to the old rate (which will be mothballed for 13 months).

Now there were some opportunities for positive action yesterday, all of which were missed. Darling could have announced the scrapping of ID Cards, the Trident replacement and the NHS computer system. Huge savings on unpopular and unworkable or unusable projects.

But instead we got a VAT cut that doesn’t affect food or domestic fuel. And an increase in duty on petrol/diesel, alcohol and tobacco to offset any savings. A rise in duty that is permanent, so there’s a 2.5% increase already inked in for Jan 2010. Assuming the headline rate of VAT isn’t increased beyond 17.%

And don’t expect a balanced budget in 2015/16 either. Labour wouldn’t be capable of achieving the necessary cuts in public spending. And the Conservatives will either muddle along ineffectually or resort to the worst excesses of Thatcherism, but with no financial services sector to bail the economy out. Until we start making “things” rather than insubstantial and intangible products and services, we’re going to witness economic contraction until the mid 2020’s.

And it is worth noting that inspite of FDR’s New Deal and WW2, the Dow didn’t recover its 1929 pre-crash position until late 1954. And in 1932, was lower than at any time in the 1800’s.

By: Unity

Unity — Mon, 24 Nov 2008 20:22:17 +0000

The disparity between my pre-statement riff on VAT and Darling’s sales pitch stems from the one piece of information I didn’t have when I wrote the first half of that post, the 2p hike in fuel duty, which wasn’t leaked in advance.

Without the rise in fuel duty, the VAT reduction would filter down into lower prices on foodstuffs and other zero rated items as reduced transport overheads but as things stand that’s gone by the board as, on current fuel prices, the combination of the VAT reduction and fuel duty hike results in a slight rise in the cost of unleaded and slight drop in the cost of diesel (around 0.2p per litre) but even that will vanish if the oil price drops any further.