VAT cut: Will it make much difference to you?

Posted by Credit expert

December 3, 2008

How much will a 2.5% cut in VAT change your life? The accountants at BDO Stoy Hayward have crunched the numbers and worked out how much a reduction will knock off some of the things you might consider buying. There’s no VAT on food, so the savings only apply to discretionary purchases.

According to BDO’s findings, reducing VAT to 15% will mean the following savings:

• 28p off a bottle of whisky, which currently costs £13
• £2.55 off a Nintendo DS Lite, currently £119.99
• £5.96 off a washing machine, currently £279.99
• £12.77 off a flat screen TV, currently £599.99
• £361.60 off a small family saloon car, currently £16,995

BDO itself says that “in most cases a customer could find better savings by simply shopping around”, as the effective reduction in price is only slightly over 2%. This looks pretty small in comparison with the the double-digit savings being offered by many high street stores in the run up to Christmas. So far the majority of voters in our poll have said the cut is unlikely to persuade them to start spending again.

Sure, the savings will add up, but it seems unlikely that a £12 saving on a £600 TV will be a deal breaker. Surely people are avoiding the high street because they are concerned they might not have a job next year, not because they are feeling over-taxed?