23 November 2008

Cutting VAT Won't Help The Economy Or Labour

The rumour is that Gordon Brown (who has helped Labour recover to a mere 11 point deficit in the polls - Wow!) is going to cut VAT by 2.5%.

While indirect taxes such as VAT are...
bad news for the poor and in theory a cut in VAT should help those on the lowest incomes the most, in reality I fear that price cuts are unlikely to be passed on to consumers.

Even if they were passed on, I doubt a 2.5% cut will have much impact on demand and politically, voters are unlikely to credit the government for falling prices anyway.

Also crucially, with deflation now seen as the biggest threat - a cut in VAT might risk deflation even more.

What Gordon Brown should have done is cut council tax bills or given a one off payment to those earning less than £15k.

Once again Brown has missed a massive opportunity to set the agenda - the current economic crisis has handed left-wingers a fantastic opportunity to redistribute. ALL voters would support help for the poorest. Instead, we are reminded what a bungling idiot Brown is and how he managed to blow an election winning lead last year in the space of a few months. Brown is a liability and once again - Labour have got to get rid of him if they seriously want a fourth term.

Expect his leadership to be questioned soon as the piss poor Tories undeservedly extend their lead despite little enthusiasm for them from the public.

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