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THE UK GOVERNMENT IS TOTALLY OUT OF TOUCH WITH REALITY
In the current economic climate the 2.5% reduction in VAT is a move that has had a limited effect on kick starting the economy and actions like this may lead people to believe that the current Government may be out of touch with reality.
The UK Government is totally out of touch with reality
Yes, because... A decrease in VAT might not necessarily increase the torrent of consumer spending required to re-start the economy
Although the standard supply and demand scale depicts that people may be more interested to spend on certain goods since prices are lowered, it does not necessarily mean it will work over the long term. The type of commodities that people need to buy other than their standard shopping are luxury goods such as televisions, holidays, houses. But in a recessive economy where people are more cautious about their spending, a decrease in price by 2.5% might not give enough incentive for people to buy. Especially when employment is at such a low, people are fearful for their livelihood where even spending on daily items seems like a burden. A mandated decrease in prices is not the long term solution to rebuild the economy.
The truth of the matter is that no-one is really sure of the extent to which cutting the VAT tax has influenced the economy yet.
What it certainly has done, however, is increase consumer spending. If the VAT tax cut had not taken place then more people will have ended up unable to afford food/living expenses, more people would have become impoverished and businesses would have struggled more. The VAT tax cut has benefited the consumer (you and me/the whole country). In a recession, people need all the help they can get, and the VAT tax cut helped us significantly.
The idea that this is a reflection of Labour's relation to reality i.e., such a relation being unrealistic and plain bad is a dangerous assumption to make.
The government is not out of touch with reality at all. It is the Conservative party that is out of touch with reality. They have voted against most of the measures that the current government has taken that were necessary to prevent the recession turning into a depression.
Yes, the government occasionally gets things wrong, but this is not the point. The point is that this government has for the vast majority of the time during this recession got it right, and that the Tory party has, most of the time, got it terribly wrong.
Vote on this point: A decrease in VAT might not necessarily increase the torrent of consumer spending required to re-start the economy
See history of changes to this point
The UK Government is totally out of touch with reality
No, because... Provides relief to the public
Lowering taxes will only allow companies to keep their profit margins for longer and not pass on the benefits to their employees. Corporate morality simply does not exist.
Although lowering taxes may not serve much of a purpose towards a economic goal as less taxes means the government will have less money to aid those who need the aid of unemployment benefits now more than ever, it does come as welcomed relief to the general public overall, lets face it, who doesn't like cheaper things.
Over the last few decades prices of goods have been driven up along with social affluence and sure enough prices should also go down as we brave the dark nights of the recession. But if companies have to lower prices themselves it can in turn cause them to make further cutbacks and lay offs that can only harm the economy more. By lowering commodity prices through taxes the government can buy time, whilst ensuring those workers on the brink of unemployment keep their jobs for another day whilst more permanent solutions are being debated and scrutinized.
Vote on this point: Provides relief to the public
See history of changes to this point
Vote on this debate: The UK Government is totally out of touch with reality
Modified:
10 Oct 2009
Point 1. A decrease in VAT might not necessarily increase the torrent of consumer spending required to re-start the economy
Although the standard supply and demand scale depicts that people may be more interested to spend on certain goods since prices are lowered, it does not necessarily mean it will work over the long term. The type of commodities that people need to buy other than their standard shopping are luxury goods such as televisions, holidays, houses. But in a recessive economy where people are more cautious about their spending, a decrease in price by 2.5% might not give enough incentive for people to buy. Especially when employment is at such a low, people are fearful for their livelihood where even spending on daily items seems like a burden. A mandated decrease in prices is not the long term solution to rebuild the economy.
The truth of the matter is that no-one is really sure of the extent to which cutting the VAT tax has influenced the economy yet.
What it certainly has done, however, is increase consumer spending. If the VAT tax cut had not taken place then more people will have ended up unable to afford food/living expenses, more people would have become impoverished and businesses would have struggled more. The VAT tax cut has benefited the consumer (you and me/the whole country). In a recession, people need all the help they can get, and the VAT tax cut helped us significantly.
The idea that this is a reflection of Labour's relation to reality i.e., such a relation being unrealistic and plain bad is a dangerous assumption to make.
The government is not out of touch with reality at all. It is the Conservative party that is out of touch with reality. They have voted against most of the measures that the current government has taken that were necessary to prevent the recession turning into a depression.
Yes, the government occasionally gets things wrong, but this is not the point. The point is that this government has for the vast majority of the time during this recession got it right, and that the Tory party has, most of the time, got it terribly wrong.
Point 1. Provides relief to the public
Although lowering taxes may not serve much of a purpose towards a economic goal as less taxes means the government will have less money to aid those who need the aid of unemployment benefits now more than ever, it does come as welcomed relief to the general public overall, lets face it, who doesn't like cheaper things.
Over the last few decades prices of goods have been driven up along with social affluence and sure enough prices should also go down as we brave the dark nights of the recession. But if companies have to lower prices themselves it can in turn cause them to make further cutbacks and lay offs that can only harm the economy more. By lowering commodity prices through taxes the government can buy time, whilst ensuring those workers on the brink of unemployment keep their jobs for another day whilst more permanent solutions are being debated and scrutinized.
Lowering taxes will only allow companies to keep their profit margins for longer and not pass on the benefits to their employees. Corporate morality simply does not exist.