Consumers indifferent to VAT cut

It’s actually quite easy to believe it’s been nearly been a year since VAT was trimmed down from 17.5% to 15% in an effort to stimulate consumer spending. It was a change intended to improve the economy that somehow passed by under most people’s radars.

So did it work?

Not according to Big 4 firm PricewaterhouseCoopers (PwC). Almost nine out of ten of people surveyed were unaffected by the change, and certainly weren’t inclined to increase their spending habits because of it. A relatively high 5% of the 2,000 consumers polled didn’t even notice a difference. But then again, they probably had more pressing concerns.

If, like me, you’re a regular consumer whose main focus over the past year has been watching the pennies whilst trying to secure employment or safeguard your job, it’s unlikely you’ll have been persuaded to spend more because things are suddenly marginally cheaper.

The only change that you might have noticed is an item or service costing a slightly more arbitrary figure, rather than say your standard x pounds and ninety-nine pence.

Retailers have felt the change more significantly, since changing price points, hard-coded finance spreadsheets and IT systems have all had to be manually modified to accommodate the VAT drop.

Implemented as part of Alistair Darling’s pre-budget report, and estimated as costing £1bn a month thus far, it seems like a rather expensive way to rejuvenate the flailing economy.

However, it was always designed to be a temporary measure; it’s due to go back up to 17.5% in January 2010.