Shoppers unmoved by VAT cut, PwC claims

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The Independent Online

The Government's 2.5 per cent cut in VAT has had almost no effect on shoppers, accountancy firm PricewaterhouseCoopers claimed yesterday.

A survey of 2,000 consumers commissioned by the firm found that 88 per cent said that the cut had had no impact on their spending.

Only 8 per cent of respondents said they had spent more with 5 per cent spending a little more and 3 per cent spending a lot more. The remaining 5 per cent of those asked were not aware of any VAT change. The cut, due to be reversed in January, was designed to prevent a meltdown on the high street during the worst of the recession. But some have questioned whether it is worth the £9bn estimated cost.

Stephen Coleclough, tax partner, said: "These figures show that, despite it being designed as an economic stimulus, the vast majority of consumers' spending has been unaffected by the VAT cut. It will be interesting to see whether consumer spending is affected by retailers potentially bringing forward their New Year sales in anticipation of a VAT increase in January."

The British Retail Consortium said the cut had had a limited but positive effect on sales. However, David Page, an economist at Investec, said that it should be considered against sterling's weakness.

"That has raised retailers costs," he said. "The cut means they have not had to pass all of that on which could have badly hit sales. The retail sector has been remarkably resilient in recent months, even if consumers have not noticed the cut."

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