Chancellor Alistair Darling’s pre-budget report is nothing more than an ill-conceived headline grabber.
Considered in relation to his cut in VAT, his statement that it was a "deliberate decision to support people and businesses through these difficult times" shows that the government has not thought this through.
We would all welcome a ‘fiscal stimulus’ package to ensure that the recession is shorter and shallower than predicted, but what this package has created is extra work and an administrative nightmare for small businesses just before Christmas and ahead of the 31 January tax deadline.
Take for example any small VAT-registered retailer which takes its responsibilities seriously and tries to pass on the full saving generated by the VAT reduction. It has until Monday morning to recalculate all prices, re-label stock, adjust the till, amend the website and organise reprinting of the catalogue.
The retailer will have to decide what to do with mail order purchases in the pipeline, and it is probably too late to change advertising. There probably won’t be any change in business levels (if you don’t want to spend £117.50, is a reduction to £115 going to change your mind?), and when the owner finally gets to sit down he’ll realise that he also has to adjust the accounting system.
Despite the negligible VAT savings, he’ll probably have put in about £500-£1k of unpaid labour!
