First, Snowflake responds to the argument that prices are falling a lot, so a smallish VAT cut won’t make any difference to consumers:
In the current tough retail climate, retailers are slashing prices… When retailers slash prices, they are in effect slashing their margins. But there is a limit as to how low they can slash. …
VAT represents a cost to business. So the 2.5% cut means that they should be able to maintain small margins even while discounting, and hence forstall the need to cut costs through letting employees go.
Second, Chris Dillow on a possible downside to these same falling prices:
inflation is highly likely to turn negative later next year…
This matters, because state pensions and social security benefits are usually changed in line with September’s inflation.
If the Chancellor were to do this next year, though, he’d have to cut benefits in nominal terms. In a rational world, this might or might not be feasible, But in our world, it is almost certainly politically unacceptable.
So he’ll have to announce a real rise in benefits. …
This rise would add to scepticism about whether Darling really has the stomach to cut spending. Which in turn might increase the pressure upon him to raise taxes.
There are some clever, well-informed, interesting people writing for the newspapers. But they’re often constrained by the editorial/business need for published stories to have a punchy narrative – not to mention the fixed deadlines and word counts. If you want sharp, uncommon insights presented for their own sake, blogs (the good ones) are hard to beat. Not that intelligent blogs don’t have good writing – indeed they’re less likely to OD on the clichéd rhetorical devices that are deemed to sell newspapers.
(Chris, I should note, does in fact have write for the mainstream media too – albeit a niche section of it. His Investors Chronicle pieces are good, but his blog’s better. Hope this remark doesn’t get him fired…)