Just about the worst tax cut they could design is a VAT cut. It’s costly on the revenue, but will have little impact on the problem. People do not feel well off. Offering them 2.5% off dearer items at a time when the shop and showroom prices are already 10-20% down is not going to do much.
It’s not fair on the poor. Essentials that make up most of the budgets of the lower paid are already VAT free. The biggest gains will be for those who buy expensive wines, flashy cars and use lots of petrol. If markets do not like the borrowing figures we will lose more from the higher long term rates of interest the markets will demand of the government.
An income tax cut on low incomes would do a lot more good, giving people more cash in hand to pay off the credit card and Hire Purchase money they owe and handle the bills for the basics that are overwhelming them. Far from showing the government is in touch or in charge, a VAT cut shows just how far they have lost the plot. Whilst any tax cut is better than none, too big a cut in the wrong tax is not going to solve anything.