VAT to 15%

If the papers are to be believed, we are in for a cut of VAT to 15% in tomorrow's Pre-Budget report.

I'm not an economist, but I don't think it is going to work. Firstly, making items slightly cheaper isn't going to make everybody to rush out and buy goods when the economy looks dreadful. I also think that the drop in prices would have a bigger effect on inflation than desired.

If you're going to have fiscal stimulus package you need to put a large amount of money, a windfall, in people's hands. Some people would save the money, but a lot of people would go out and spend it.

Gordon Brown last week mentioned that the bigger threat to the economy now is deflation rather than inflation. Wouldn't the cut in VAT compound this possible problem?

What happens if none of this works? Another stimulus package, more borrowing and lots more tax later.

Squiffy.