At an individual level, its hard to feel the change in VAT will stimulate spending and disappointing that duty on petrol increased (but I guess this is 'green'). I'm relaxed about the changes to personal tax and NI, partly reflecting a personal view on the levels of reward and taxation, partly as the pain is not immediate. From the perspective of a small business, the ability to spread tax payments is the major announcement and warmly received; as is the greater access to loans if required. The change to NI will obviously hit home later, are less welcome but should be digestable.

@michael - I started a discussion on IT Counts that looks at the general issue of how this reduction is managed from an IT perspective. That debate has now widened to incorporate closely related business issues.

The software industry has responded well on my personal weblog with good advice coming from some of the vendors.

An area of great concern for commenters to the post is the apparent lack of understanding about cost of implementation. Philip Woodgate makes an excellent point about this which is followed by a sharp analysis from Rob Watson. I think it is obvious that members feel strongly about this issue but are arguing the points logically and with a degree of understanding it is useful to communicate back to those in power.

As a freelance consultant with a UK limited company I am taking advantage of the VAT flat rate scheme and to my surprise I discovered yesterday that the 2.5% cut in VAT is only partially filtered down to those small businesses that make use of this special flat rate scheme. Whilst VAT is cut from 17.5% to 15%, my new flat rate goes down to 11.5% from 13%. Which will actually mean less money that's retained in my business. With this in mind, I find it hard to understand how the government can say that they are "going something for SMEs". The only solution for me is to switch to the normal VAT rate scheme, which will result in more admin for the quartely VAT bill. Michael Koch SAP Consultant

Michael

Related to Dennis's point I have blogged elsewhere about the Gov'ts official impact assessment related to this change. It grossly under estimates the costs to small businesses (less than £90 each in total). It is evidently based on so many misconceptions as to be not only worthless but also to seriously undermine any credibility that these impact assessments ae supposed to have. 

The document seeks to excuse any errors on the Gov'ts unwillingness to consult on tax rate changes.  This too is completely fallacious.  The gross under statement of the costs/impact of this change would be the same regardless of the tax rate change.  There would have been marginally more credibility if the Gov't had said we are unable to estimate the cost/impact but frankly that too should be unacceptable.

 

The VAT rate change is a gimmick. When stores are offering 20% to 70% deals just over 2% is meaningless. It is however a disaster for small hauliers on tiny margins who see recoverable VAT replaced with irrecoverable duty.

This sort of approach is doomed to failure. It does not address the root cause of the problem, which is that lack of confidence in the housing market has destroyed consumer spending. Get the building firms building houses for first time buyers with the Government either sponsoring a shared ownership scheme or a deposit guarantee. This will put back confidence in the market and lenders will feel able to lend further up the chain. It will also reduce unemployment. The VAT change will do nothing.