I said that Gordon Brown’s VAT cut was too small to notice – yet I have just saved £15 on furniture imports from Bali. Of course, £15 is a serious, noticeable amount of money. Problem is, it only helps people who have £600 to fork out on furniture. And here this is another defect of Brown’s useless VAT cut: it helps people like me – who are saving like mad to atone for their borrowing sins – instead of helping the lower-income groups who are most likely to spend extra money. The VAT and duty cuts announced in the last pre-Budget report are, in fact, perfectly regressive – helping the richest the most and the poorest the least.
This should not be so – at least not in theory. Sales taxes are flat and, ergo, regressive as they take a greater proportion of poorers people’s income.
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