Tuesday, February 10, 2009

Clegg and Cameron's nonsensical language about the VAT cut

Nick Clegg's spending package yesterday sounded very attractive. One point, however.

He's now repeating the sort of mantra about the VAT cut that Cameron has been chanting.

Clegg said that the VAT cut has wasted £12.5 Billion "which hasn't done anyone any good".

This is nonsense. If we accept Clegg's logic, then may I ask: Where has the £12.5 billion gone? Into a hole in the ground? Of course not, it has actually gone or is going, effectively, into people's pockets because goods are not as expensive by 2.5 points (over 117.5 points - which is about 2.1% by my maths) compared to their previous prices.

All right. So people may not have noticed the saving. That's a different matter. I have noticed the saving in several shopping trips I have made. But if you accept that people haven't noticed the change then one has to ask: What does that say about the state of profligacy of the nation, that they have been spending money hand over fist so much that they don't notice a 2.5% saving?

The truth is that, unless the government has spent £12.5billion on administrating the VAT cut, which it hasn't, then the cut has made a difference, but it is a difference which has been dispersed in very small portions over millions of purchases.

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