Of course, there’s not a huge amount that a 2.5% reduction will give you. It certainly won’t help you on regular shopping – and the 2.1% reduction in overall price is hardly something to write home about, especially when compared to the discounts in the sales that will no doubt start before we’re actually at Christmas.

But hey, it’s all fine right? We’re still saving some money now and chances are that most of us won’t get hit with the new 45% tax right… so it’s got to be good! Well – not for everyone. One of the things that people don’t seem to take into account is the amount that will have to be spent on re-printing everything with a VAT rate on it, which will particularly hurt small businesses who likely don’t pay VAT anyway as they’re not registered – meaning that they’ll have to take on the cost themselves. Sure, it’s still spending – but it’s not really what the government would have wanted I bet.

Add into this the massive cost in terms of lost productivity from every development team that realised that they’d make a bit of a cock up when they hard-coded 17.5% in there. It’s not going to have been a cheap move, and no doubt will not have been completed everywhere.

I guess over the next thirteen months we’ll see if this has any noticeable effect in terms of average spending and attempting to avoid the recession that everyone keeps on banging on about.

While this might sound good to start with there are a few things to consider. As the article points out, we’re likely to have to put up with increased taxes in the long run to compensate for the lost revenue, and we’re probably going to have to increase our national debt in order to cover for it in the short term if we want to maintain the level of funding for services.

There’s also the problem that people might now wait for the reduction to kick in before they’re willing to part with money, although Christmas will likely force people to spend anyway. This of course has the problem of decreasing spending further while people wait for the reduction to roll round and will therefore damage the economy more in the immediate future.

Finally there’s the cynic in me saying that the consumers might not see much of this decrease. Pretty much all the prices in shops are with VAT included, so people don’t really know how much of that is VAT, and therefore the savings that get passed on (if any) could easily be less than they should be. This will lead to companies making more money, which I suppose is possibly a good thing if we want to boost the economy, but is bad for the consumer whichever way you look at it.

Whatever happens it’ll be interesting to see how this pans out.