Shops wont bother reducing things by 2.5% - they’ll just keep the prices where they were and pocket the difference.It will be exactly the same as happened with the banks and the oil companies. All they do is see this as an opportunity to earn a bit more money whilst ripping off the poor powerless consumers. And the Government will be unable to stop them.

A 2.5% cut will make no difference whatsoever. An item costing £11.75 will cost £11.50 after the discount, a difference of a whopping 25p. Is that really going to get people to start buying more? How can it when really big discounts, such as the ones made by Marks and Spencer last week, are the only things that get people’s attention and into their shops.

This reduction will cost about £12.5bn, but yield only about £200 per annum for an average earner.

Mortgages will not be affected by a cut in VAT, nor will rent, food, council tax, water rates or loan interest. Home gas and electricity will only see very small gains. These are the areas where we’re really suffering and nothing in this package will help.

The only people who’ll really get benefit from this tax cut are those who can afford to spend thousands of pounds on items, anything less than that and the savings are minimal. These people don’t need our help, they’ve got enough money as it is. The people really suffering are the poor and once again they’re being ignored.

This change will cause massive problems to shops who need to now change the price of everything on display. How much is that going to cost them? How long will that take? This idea has been poorly thought out, just like most of the New Labour ideas, it sounds good on paper but trying to make it work will undo any of the benefits it brings.

That shirt marked as £19.99 today "should" be £19.56 on Monday and the new computer game costing £39.99 today "should" be £39.14. There is one retailer who famously only charges in whole pounds - what will they do?

Shops will now have to give staff overtime in order to ensure all their prices have changed by Monday. This extra cost, alongside the increases in National Insurance, will counteract any benefit of extra sales and wont help hard-up shopkeepers stay in business. The whole idea has been poorly thought-through and badly implemented.

Rise in income related to a decrease in the consumption tax is not as visible to consumers as say a tax rebate check, tax refund, or even income tax reduction all of which are highly visible.

Third, relatively speaking, UK consumers already spend a large amount of their income on consumption; while it is important to raise this value in the short term, it will not do any good if measures aren't taken to alter household spending behavior in the long term. Measures that only the government can and should make include regulating the terms of the loans offered by banks, establishing restrictions on the level of leverage both banks and consumers can mainain, etc.

Some of the industries impacted most by the recent economic contraction are the finance and natural resource industries. The UK has been a center of global finance for a long time and can solidify its position by profiting from the atrocious management at their New York counterparts. The Labour government should avoid making financial institutions the scapegoat for the recessions (though they do bear a fair share of the blame). Excessive regulations on capital (especially protectionist measures to limit foreign ownership of key firms) would be disastrous and allow more competitive regions to steal market share (e.g. Dubai). Natural resource industries will do just fine once the economy recovers as indicated by pre-crisis profits; the government should resist concesions to them at all costs.