VAT Rate Change

In an interview for the BBC, David Cameron has claimed that the VAT Rate Change has failed, saying "The VAT cut has been an unbelievable and expensive failure." When we look at the numbers, it's hard to say otherwise - even after that VAT rate change, the numbers of shoppers was down in December compared to previous years data. Compared to last year, retail footfall was down 3.1% in December from a year earlier, traditionally a busy period in the run up to Christmas. On the VAT rate change, Cameron said: "I think this will go down in history as one of the most appalling wastes of money in British political history." The government have argued that a VAT rate change is the fairest way to get money into the economy - arguing that low-income households spend a larger share of their income on VAT than richer households. While the above numbers would suggest that the VAT rate change has indeed failed, its hard to be 100% sure this is the case. Footfall was down by 3.1%, but what if the rate change had not been implemented? It could be that while the VAT rate change did not turn the recession around, it may well have softened the blow - for all we know, without the VAT cut, footfall may have been down by 5% or more. It is hard to know whether Cameron's comments are the truth, or merely political spin, however, one thing is for certain - in relation to the effectiveness of the VAT rate change, the Jury is most definitely still out.