VAT Rate Change

The idea behind the UK VAT rate change was to increase consumer spending by lowing prices on goods, thus letting their money go further. However, it would appear that this is not the case across the board. Legally, the government cannot force companies to reduce their prices. Many companies have kept their prices the same, and are simply pocketing the 2.5% difference caused by the VAT rate change, leaving consumers angry and worse off. Perhaps most shockingly, councils are not passing on the VAT rate change. Across the country, parking machines are still charging the same amount as they were pre-VAT cut. This means that councils across the country are netting up to an additionally £10,000 over the course of the year. Similar things are happening in many council-owned sports and leisure centres, where prices for using facilities such as ice rinks and swimming pools have stayed the same, or even increased in some cases. If councils are not passing on the VAT rate change, how can companies be expected to? In many cases, they are not: According to the Observer, BSkyB-owned ISP UK Online decided not to pass on VAT rate savings to their customers because of the expense and time required to change billing systems. Garden centre Homebase originally offered the VAT rate change when it was announced in December, and yet later stopped offering the 2.5% reduction in January, according to a story in the News of the World. Of course, many companies have passed on the VAT rate change, but while there are still large numbers of companies not doing so, and even the council not doing so, it does beg the question - who really benefits, consumers or big business?