There was disappointment that no action was taken on business rates and, although store chiefs were pleased by the reduction of VAT from 17.5 per cent to 15 per cent from December 1, there was concern that the reduction would not be noticed by shoppers.
DSGi chief executive John Browett said the electricals retailer would pass on lower VAT. He said: “The antidote to the economic downturn is as much about restoring consumer confidence as anything. This announcement is a welcome step.”
But Next chief executive Simon Wolfson was an outspoken critic of the VAT change.
In a letter to The Times today, Wolfson argued that the move "defies all economic logic".
He wrote: "The change will be administratively expensive, do nothing to stimulate demand and leave few feeling any better off.
"The modest price cuts seem all the more obscure in the context of an increasing risk of deflation."
British Retail Consortium director general Stephen Robertson said the change was “modest but welcome” but cautioned: “Shops will cope, but implementing a new VAT rate in just a week will be exceptionally difficult for retailers at their busiest time of year.
“IT system changes, replacing shelf labels and stickering over prices on packs will be a mammoth and costly task.”
Deloitte indirect tax partner Daniel Lyons questioned the impact of the VAT change.
He said the average earner – with an annual salary of£25,000 – would only save about£170 a year. Many food items do not attract VAT and the change may be too small to influence big-ticket purchases, he warned. A£550 flatscreen TV, for instance, would only go down to£538.38 and a supermarket shopping basket from£50 to£49.47.
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