Why a VAT cut would pay for itself

The Guardian is wrong to oppose Balls's call for a temporary VAT cut.

Ed Balls's bold call for a temporary VAT cut might have been welcomed by Guido Fawkes but some of the shadow chancellor's traditional allies haven't been so supportive. A Guardian editorial declares that a cut in VAT "makes sense only if one wants to shovel £2.5bn a month out of the Treasury as fast as possible". But it's clear that the Grauniad has got its sums wrong. Osborne's VAT increase will raise around £13bn a year, so at worst a reduction to 17.5 per cent would cost the Treasury £1.08bn a month, not £2.5bn.

This error aside, there's much evidence that a cut in VAT would largely pay for itself. The Office for Budget Responsibility has forecast that the increase will reduce GDP by around 0.3 per cent a year. We know from the OBR's most recent Economic and Fiscal Outlook that a reduction of 0.3 per cent in growth adds around £13.9bn to the deficit (over two years).

Ok, so what about the remaining £7bn? Well, as Balls said in his speech yesterday, a VAT cut would act as an effective fiscal stimulus. The Tories' decision to raise the tax was partly based on the mistaken belief that its temporary reduction to 15 per cent failed to stimulate the economy. But an analysis by the Centre for Economics and Business Research found that consumers spent as much as £9bn more than they otherwise would have done during the period for which the cut ran.

A VAT cut would boost consumer confidence, lower inflation (thus reducing the risk of a premature rate rise), protect retail jobs and increase real wages, meaning that it would likely pay for itself in the long-term. With growth flat for the last six months, the economic case for a VAT cut is overwhelming.

George Eaton is political editor of the New Statesman.

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For the first time in my life I have a sworn enemy – and I don’t even know her name

The cyclist, though, was enraged. “THAT’S CLEVER, ISN’T IT?” she yelled. “WALKING IN THE ROAD!”

Last month, I made an enemy. I do not say this lightly, and I certainly don’t say it with pride, as a more aggressive male might. Throughout my life I have avoided confrontation with a scrupulousness that an unkind observer would call out-and-out cowardice. A waiter could bring the wrong order, cold and crawling with maggots, and in response to “How is everything?” I’d still manage a grin and a “lovely, thanks”.

On the Underground, I’m so wary of being a bad citizen that I often give up my seat to people who aren’t pregnant, aren’t significantly older than me, and in some cases are far better equipped to stand than I am. If there’s one thing I am not, it’s any sort of provocateur. And yet now this: a feud.

And I don’t even know my enemy’s name.

She was on a bike when I accidentally entered her life. I was pushing a buggy and I wandered – rashly, in her view – into her path. There’s little doubt that I was to blame: walking on the road while in charge of a minor is not something encouraged by the Highway Code. In my defence, it was a quiet, suburban street; the cyclist was the only vehicle of any kind; and I was half a street’s length away from physically colliding with her. It was the misjudgment of a sleep-deprived parent rather than an act of malice.

The cyclist, though, was enraged. “THAT’S CLEVER, ISN’T IT?” she yelled. “WALKING IN THE ROAD!”

I was stung by what someone on The Apprentice might refer to as her negative feedback, and walked on with a redoubled sense of the parental inadequacy that is my default state even at the best of times.

A sad little incident, but a one-off, you would think. Only a week later, though, I was walking in a different part of town, this time without the toddler and engrossed in my phone. Again, I accept my culpability in crossing the road without paying due attention; again, I have to point out that it was only a “close shave” in the sense that meteorites are sometimes reported to have “narrowly missed crashing into the Earth” by 50,000 miles. It might have merited, at worst, a reproving ting of the bell. Instead came a familiar voice. “IT’S YOU AGAIN!” she yelled, wrathfully.

This time the shock brought a retort out of me, probably the harshest thing I have ever shouted at a stranger: “WHY ARE YOU SO UNPLEASANT?”

None of this is X-rated stuff, but it adds up to what I can only call a vendetta – something I never expected to pick up on the way to Waitrose. So I am writing this, as much as anything, in the spirit of rapprochement. I really believe that our third meeting, whenever it comes, can be a much happier affair. People can change. Who knows: maybe I’ll even be walking on the pavement

Mark Watson is a stand-up comedian and novelist. His most recent book, Crap at the Environment, follows his own efforts to halve his carbon footprint over one year.

This article first appeared in the 20 October 2016 issue of the New Statesman, Brothers in blood