Producer Amy moving to Radio 1 Breakfast

[Jono]

Every household in the country has been promised immediate support to get through the economic downturn amid growing expectations of a cut in VAT.

A reduction of VAT from 17.5% to 15% is emerging as the likely centrepiece of the Pre-Budget Report on Monday.

Other measures widely expected in the statement are a postponement of higher road tax for older vehicles and more help for mortgage holders in arrears.

http://www.teletext.co.uk/news/national/9d08569f5b0f1c7be392bc72dedc30b7/Brown+%27plans+to+reduce+VAT%27.aspx

Good news but I can't imagine it'll have a huge impact. It's quite a small cut, shame the EU stops it from dropping any further.

[E*F*4L]

by cutting VAT, we are going to pay more in the long run when taxes go up, this government has wasted so much money :x

[Jono]

by cutting VAT, we are going to pay more in the long run when taxes go up, this government has wasted so much money :x

I bet if David Cameron had announced that after the elections you'd be praising him Who says we will be taxed? If it's Labour we might be, but it could be a new Government in a few years.

[E*F*4L]

I bet if David Cameron had announced that after the elections you'd be praising him

no

[Jono]

no

One would assume the credit crunch isn't effecting you considering you spent £100 on a Children In Need teddy this week

[E*F*4L]

it has, hit my shares

all Labour do is pour billions of money away on stupid ideas.

they waste millions on making the NHS worse by employing uncountable managers instead of doctors & nurses.

take billions from private sector workers personal pensions to pay for civil servants ring-fenced pensions.

cutting funding to councils, = making the council tax go up whilst cutting services & having to employ people to make sure people put their waste-bin in the correct place.

allow 24hr binge drinking by allowing 24hr pub opening hours, = money needed to pay for the drink related crimes & accidents.

nannying everyone, with schemes set up by unelected quangos = billions just thrown away.

announced that they were going to sell off the UK gold reserve = the already low gold price crashed when our gold was sold off.

spent the surplus tax revenue that was generated = we now have to borrow money which we will have to pay back with interest.

spent billions on Northan Rock to save a few hundred jobs, just because they were located in Labour heartlands = it would have been cheaper to pay the jobless workers dole money then keeping it afloat after the profitable parts were sold off.

[matt_32510]

It' all very good cutting VAT, tax etc but if it doesn't help boost the economy and we go further into recession, then we will be in a worse state, obviously if it works then it will help the economy. A big 50/50 gamble but what else can they do.

[Jono]

it has, hit my shares

Well there you go. It's not about those with shares. It's a cut to help the poorest. You can't keep everyone happy all of the time.

[E*F*4L]

It' all very good cutting VAT, tax etc but if it doesn't help boost the economy and we go further into recession, then we will be in a worse state, obviously if it works then it will help the economy. A big 50/50 gamble but what else can they do.

the real problem has been caused by people borrowing money they don't have, a lot of people in the UK buy stuff on credit cards & money from loans & they cut interest rates so it's easier to borrow money to spend,

but

with people cutting back on everything & job security at a all time low people aren't going to spend their way out of it, the interest rate cut also affects responsible people who save their money, the Russian central bank raised its interest rate to 12% to stop people from taking their money out of the banks as a lot of investment had been made in Russia & the stock market was collapsing as people sold their Russian holdings to balance out their losses from other markets.

also, in Iran you can borrow money from a bank & then put the money in a account at the same bank & you will earn more interest on the cash in the account that the interest the bank charges you for the loan :shock:

Well there you go. It's not about those with shares. It's a cut to help the poorest. You can't keep everyone happy all of the time.

hang on, im not loaded !

i work hard for my money & i save it, i have never been in debt why should i have to suffer because people want to spend money they don't have ?

i understand people need loans for houses & uni ect, but not for loads of clothes & other crap.

[Serin]

The thinking behind cutting taxes is that they ensure people have more credit to dispose of which, theoretically, is supposed to have inflationary effects in a recessive economy heading towards deflation, but cutting taxes in anticipation it will make people spend rather than save is foolish.

Historically during recessions tax cuts have only worked in the long-term which means a period of low tax rates over 2 or more years before the economy begins to show signs of recovery. There is no short-term fix. Long-term low tax rates have dire effects on public spending because there is less revenue in the Treasury which can force contractions in the public sector creating further unemployment. Infrastructure also loses out as a result with public services suffering.

If the government can borrow enough credit to stave off public sector job cuts then their plans may work, though taxes would increase drastically after 2 to 3 years to repay the incurred debts and they would have to borrow significantly more than they are suggesting to keep public sector workers in their jobs.

Government (or national) debt at the moment is over £600 billion and owing to its plans for further borrowing would likely reach £1 trillion before 2015 at the latest which means it will probably get there much sooner if this recession is protracted.

[Lucinda]

VAT has been at 17.5% for as long as I can remember. I suppose this might help but, like Serin says, not in the short term. Increasing public spending is thought to be a good way of getting out of a recession, with cash injections and positive multiplier effects. As has been said previously though, cutting taxes while increasing spending leads to unsustainable national debt and problems for future governments.

[Hammer]

allow 24hr binge drinking by allowing 24hr pub opening hours, = money needed to pay for the drink related crimes & accidents.

There has been no sudden upsurge in crime and disorder related to 24 hour drinking. It's as bad as it was before, no worse.

spent billions on Northan Rock to save a few hundred jobs, just because they were located in Labour heartlands

Not to mention the savings accounts of millions of people...

Anyway, the blame for the credit crunch is not down to the people who have borrowed money 'for clothes' or whatever. It's the banks' fault. They've operated for years on the basis of invisible money that doesn't actually exist, chucking about money that isn't there on the basis that there won't be a slump to expose them. And that's what's happened.

[Viv]

it has, hit my shares

I agree with every word. Shambolic. I actually despair for this Country, I really do.

[Lucinda]

Anyway, the blame for the credit crunch is not down to the people who have borrowed money 'for clothes' or whatever. It's the banks' fault. They've operated for years on the basis of invisible money that doesn't actually exist, chucking about money that isn't there on the basis that there won't be a slump to expose them. And that's what's happened.

I agree. I'm doing a module on this at the moment, invisible capital that doesn't exist being packaged and repackaged and sold as debt till no one knows who's liable for what debt any more.

I spent a week a few years back doing work experience at a high profile investment bank that recently went under (no prizes for guessing which one) and it all seemed like fiction, everything they were doing. It was all about packaging up virtual money and sending it through virtual companies in tiny tax havens and I didn't understand anything I did there. In retrospect, probably a good thing I didn't decide to go for investment banking as a career path.

[dstrkzn]

I think the cut in VAT is better than nothing but its tiny! Its hardly going to have a major effect.