The next meeting of the Bards of New Brighton is Monday 8th so I’d better get cracking as I prefer not to read the same poem twice. 

This is the 1st for this month’s meeting:

Borrowed Time

2.5% off everything!
Go forth and Spend, Spend Spend!
Max out that Credit Card
Like the limit increases will never end

Isn’t it funny
The government is borrowing money
To encourage us to borrow money
Fuelling our greed
For imported consumer goods
We can’t afford
and don’t need

Of course I refer to the 2.5% VAT cut.  There are several problems with it as far as I can see:

Lack of Notice

One of the great things about living in London is that at parties you almost always meet someone with an interesting job.  In 1999 I met a girl who was in Tory Blair’s think-tank that was dealing with the millennium bug.  Strangely, she didn’t have any background in IT and had bought the hysteria hook line and sinker.  I managed to calm her down for example by pointing out that credit cards with year 2000 expiry dates had started appearing in 1997.  The banks simply wrote to all their customers urging them to test their billing systems 6 months before, and as far as I’m aware there were no cases of year 2000 expiry cards being rejected.  After all, people had known about it for quite a while and so it was only really old software that was likely to cause problems, and businesses aren’t stupid – if they depend on software for their business then they will make sure it is tested in plenty of time. 

Of course the hysteria about the millenium bug was a good thing in a way, nobody could be in any doubt that there was a potential issue. 

But whilst people had plenty time to prepare for the millennium bug, we were given about a couple of weeks to deal with the VAT change.  The number of times I’ve developed systems for people who have said “Don’t worry, VAT won’t change, and if it does we’ll have plenty of notice to deal with it then” is quite chilling. 

Here we are at a time when businesses in practically every sector are struggling, and here the government is springing the expense and hassle of getting people to check and possibly modify their systems – often at high consultant rates if they don’t have an internal IT department. 

Will it really make people spend?

Of course businesses won’t be too worried about spending a few quid on IT if it makes customers more likely to spend more money.  But will it? 

Our next major purchase is likely to be a Samsung American Style Fridge.  (Ah in the days before having kids, it would have been the 63″ Samsung TV on the next stand…).  They are already reduced from £650 to £500 – but it’s still a bit pricey for something that would be convenient, but we don’t really need. 

We are therefore watching the sales – if it comes down to £400 I’ll snap one up right away.  £450 I’d give it serious thought.  But even if Currys pass on the 2.5% discount, a price tag of £487.50 won’t make me rush out to buy one. 

My eldest daughter wants a guitar, and I’ve been watching one on Ebuyer that was reduced from £60 to £44.  When I heard about the VAT reduction I thought I might as well wait.  Sure enough, they sent out an email on Friday to say that everything was down in price.  Only it’s gone up to £46.  And everything else I was looking at has increased in price too.  Either they’ve made a mistake in the rush to get the change put through, or they are hoping the confusion will let them get away with putting their prices up whilst telling everyone they’ve gone down. 

Will it help the economy? 

The economy is a complicated beast with lots of variables. 

A couple of months ago Phil Redmond justified the cost of La Machine by saying that if everyone who comes to Liverpool buys a bottle of water here then it’s cost will be justified. 

It’s a good sound-bite, and is a good argument unless you scratch the surface. 

If someone buys a bottle of water from Tesco, does it benefit Liverpool’s economy?  The Hertfordshire based company will make a profit, but the girl on the checkout, the guy who stacks the shelves, the guy who stands on the door and whacks the scallys, the guy who follows instructions from head office don’t typically get bonuses just because the shop is doing well one day.  Someone may get an extra shift out of it, but that’s about it. 

Indeed most of the shops, hotels, pubs, transport companies, etc in Liverpool are owned by companies far from Merseyside.  Anything that encourages tourism in the long term will of course make jobs more secure, but whether tourism in Liverpool next year is increased, bearing in mind there won’t be anything special going on, remains to be seen. 

Likewise, if I go out and buy my Samsung Fridge – it’s made in Korea by a Korean firm (lets face it, to buy British these days you’d need to invent a time-machine first).  Whilst it will help the employees of the retailer, the logistics people, the people who run the warehouses, etc, I’d guesstimate about half of what I spend will go directly out of the country. 

Bearing in mind I will be whacking it on to my credit card (well you didn’t really think I had £400+ burning a hole in my back pocket did you?) and the bank will potentially borrow the money I spend from an overseas bank, and the government are borrowing money (again probably from overseas) to make up the shortfall in the VAT, is it really the answer to the underlying problems in our economy?