Page last updated at 17:58 GMT, Tuesday, 25 November 2008

Cut in VAT leaves shoppers cold

By Peter Jackson
BBC News

Chancellor Alistair Darling's 2.5% cut in VAT aims to kick-start the economy by getting Britain spending, but shoppers at Europe's biggest urban retail outlet remain unconvinced.
Isla Boxer
Shops are already discounting their prices, says Ilsa Boxer, 37

People at newly-opened Westfield in west London gave a lukewarm reaction to the reduction to 15%, with some calling it "vote manure" and "misguided".

Retired manufacturing manager Peter Hounsom, 61, said the 2.5% cut would have no real impact on someone who had just lost their job.

"It's a meaningless gesture. They're making appropriate noises, but what they're doing is not particularly meaningful. It's vote manure," he said.

"I can't see it having an impact. They're just tinkering at the edges."

Ilsa Boxer, a 37-year-old mother, said: "At this time of year, you will have to shop anyway. If you get 2.5% off, great, but so many shops are discounting anyway, it won't make much of a difference."

Electrician Andy Martin, 45, said: "It won't have any effect, you'd rather have the money in your pocket... it will not incentivise me to go out and spend in the slightest."

Engineer Steve Fitzpatrick, 56, agreed.

"It's about making people feel good. I don't think you can buy your way out of recession. It's about perceptions," he said.

VAT: What you could save
Apple Ipod Nano 16gb. Current price: 149 - save 3.17
Aspinal of London leather Eaton handbag. Current price: 475 - save 10.11
Camper walking shoes . Current price: 90 - save 1.91
TagHeuer watch. Current price: 10,000 - save 212.77

Retail psychologist Dr Tim Denison, 46, went further, calling the announcement "misguided".

"It's meant to be a pre-Christmas boost, but retailers will struggle to implement it quickly enough," he said.

"We're already in the countdown to Christmas, so it won't create the fillip the government want. They should have acted earlier.

"What is a 2% discount these days? Consumers are more concerned about the price of petrol and utility bills. It's designed to be a confidence booster, but there are far more pressing things on the consumers mind like job security."

The VAT cut from 17.5% to 15% comes into effect on 1 December for 13 months, although there is no requirement for shops to drop prices in line with the cut.

Elizabeth Hardy, manager of women's clothes shop Hobbs, said she was already offering 50 off selected boots and 40% off selected coats in the run-up to Christmas.

She said prices would probably not change to reflect VAT until the new year.

Steve Fitzpatrick
Steve Fitzpatrick, 56, says the cut is about making people feel good

Angela Riccobena, manager of luxury leather goods store Aspinal of London, said she was still waiting for official guidance on VAT pricing.

She thinks it will be taken off at the point of sale, avoiding the need to change her shelf prices.

"I don't think it will have much of an impact, but if people think they'll get a bit off then that's good," she said.

Clinton Cards manager Cece Iheagwam said it would be a struggle to re-price her stock by 1 December because she would need extra staff to cope.

"It's not what we need now we're close to Christmas. I'm waiting for instructions" she said.

The chancellor has announced that National Insurance will rise by 0.5% from 2011 to help pay for the VAT cut.

Anna Hudson, 68, said when people realised how much they would have to pay back in the future, they will question whether it was worth it.

"I don't think it will make any difference unless you make a big purchase. A lot of people are far more worried about their jobs," she said.

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