So, the other weekend I commented briefly on the (at the time) rumoured reduction in VAT, which was later announced in the pre-budget report last Monday. This has now come into force this week, with retailers advertising “early VAT reductions” in the run up to this, presumably as a way of tempting customers to spend during the week that I predicted would be quite light on the spending (despite spending over £100 myself).
Of course, there’s not a huge amount that a 2.5% reduction will give you. It certainly won’t help you on regular shopping – and the 2.1% reduction in overall price is hardly something to write home about, especially when compared to the discounts in the sales that will no doubt start before we’re actually at Christmas.
But hey, it’s all fine right? We’re still saving some money now and chances are that most of us won’t get hit with the new 45% tax right… so it’s got to be good! Well – not for everyone. One of the things that people don’t seem to take into account is the amount that will have to be spent on re-printing everything with a VAT rate on it, which will particularly hurt small businesses who likely don’t pay VAT anyway as they’re not registered – meaning that they’ll have to take on the cost themselves. Sure, it’s still spending – but it’s not really what the government would have wanted I bet.
Add into this the massive cost in terms of lost productivity from every development team that realised that they’d make a bit of a cock up when they hard-coded 17.5% in there. It’s not going to have been a cheap move, and no doubt will not have been completed everywhere.
I guess over the next thirteen months we’ll see if this has any noticeable effect in terms of average spending and attempting to avoid the recession that everyone keeps on banging on about.