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Is VAT the first crutch to be taken away from the UK economy?

Forecasts regarding the increase in VAT, from 15% to 17.5%, are causing concern with some analysts expecting a reduction of 0.7% in UK retail spending in the first part of 2010, and a further 0.2% reduction in the latter part of the year. While this will obviously have an impact upon the performance of the UK economy in the short to medium term, there is a fear that by taking away the first of many crutches which the UK government has added to the UK economy, we could see significant downward pressure in the short to medium term.

One obvious crutch which will be taken away at some point is the quantitative easing program which has seen £200 billion of liquidity injected into the UK banking system. If the increase in VAT has such a detrimental impact on the UK economy, how can we expect the UK economy to react when the quantitative easing program is withdrawn?

While the UK government has handled the difficult economic environment as well as anybody might have expected, the introduction of a number of crutches for the economy does cause a problem in the long term. When and how do you take away these crutches without prompting the UK economy to fall by the wayside?

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