UK: VAT cut is a feasible folly
- Recent reports indicate the government is considering a temporary VAT cut, despite historical evidence that it makes little difference to UK consumption. It is also terribly targeted to current needs, although a selective re-rating might work.- If a headline cut is popular enough, it will probably happen, irrespective of the merits. I estimate the pass-through of a 1yr cut at about 50% to the price level.
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