I really do not know how they can claim this. All the indicators are indicating are that the effects are negligible at best.

How anyone can demonstrate that the VAT cut has created spending increases is beyond me.

Sounds like someone is trying to change a narrative

All the indicators are indicating are that the effects are negligible at best.

Which indicators would those be?

Is this an argument for further VAT (or other tax) cuts?

*sigh*. Right, somebody needs to figure out who this CEBR are, and whether they have put any real research into this, or are just churning out propaganda to serve their agenda and get their name in the press. My bet is the latter. Their website has no substance, just a horde of press releases calling for tax cuts. I have difficulty seeing how they can establish a causal relationship between VAT changes and retail spending growth.

In any case, why do we want to boost consumer spending, particularly on products rather than services, given that we rely so heavily on imports?

The proposed scrappage payment for trading in an old car for a new car is an even more ludicrous instance of this kind of wooly thinking, given that almost no cars are manufactured in Britain today.

Any benefit from such stimulus (which is academically questionable anyway) is simply being exported.

What the government should do is to reduce taxes on labour, thus encouraging companies to retain and take on employees.

MORE LABOUR SPIN AND LIES !

Perhaps they mean the amount of tax payers money being spent on Labour MP’s expenses before we finally get the chance to boot them all out of the Westminster Trough.
I should think they ARE spending like there’s no tomorrow, because for Labour……There Isn’t.

Well they don’t look especially party political and since they are consultants, it might just be that the full report is available to their clients only (and perhaps polite researchers if they get in contact, which can work in my experience). I am willing to keep an open mind on this as it certainly wouldn’t be the first time that a judicious tax cut has been able to improve economic outcomes.

Nick: yes, my initial suspicion was perhaps a little too harsh – they seem to be a small group built around a certain Douglas McWilliams, who looks like a moderately respectable-looking economist-cum-pundit.

But news reports based on unpublished research can’t be anything more than an argument to the authority of the researcher. CEBR certainly don’t have enough of a reputation that we should accept their opinion as being worth something just because of who they are.

How do they draw this conclusion without a control group?

Is it any surprise at all that people spent money over Christmas? It will be interesting to see if any spending increase is sustained in the longer term; while I’m dubious of the merits to businesses and individuals of the VAT cut (it cost small businesses, the likes of which I work with, time and money to implement!) I’m certain that the media focus on reduced prices and bargains to be had (real or imagined) will have encouraged a few to spend sooner or more than would otherwise have elected to. It remains clear that a reduction in income tax would have been cheaper and better.

Interesting if true – though I am still sceptical.

How would you isolate the VAT impact from the interest rate impact?
My tracker mortgage payment has fallen from £500 to £50 for example.

“It argues that the temporary cut of 2.5%, which expires in January 2010, should be extended for six months.”

What… until after the General Election? My gob is truly smacked!