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.