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Government reduces VAT from 17.5% to 15%

The reduction in VAT is not unexpected after a number of precise leaks to the press over the weekend, however the changes to duty on alcohol and petrol did come as something of a surprise. The government did not announce this change put in the small print it is evident that duty on alcohol and petrol would be increased so the prices will remain the same as before the VAT cut.

The VAT cut will come into play on 1 December and while there are hopes that it will at least instigate some kind of recovering in the economy, many in the retail sector are very wary. They argue that if 20% discount days, such as those seen last week, cannot kick start the retail sector than a 2.5% reduction in VAT will have little impact.

In total the government is taking a £21 billion gamble across the board with a number of tax incentives, tax reductions and borrowings. If this budget does not stimulate the economy then the UK is in big big trouble. This really is the last throw of the dice for the Chancellor and the PM and while on the surface they look confident that it will do the job, underneath there are grave concerns.

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