King warns of too-low inflation

Really2

StevieJ wrote: »

A little out of date, but,
http://hansard.millbanksystems.com/written_answers/1988/jun/07/vat-and-the-rpi

Hansard 1803–2005 → 1980s → 1988 → June 1988 → 7 June 1988 → Written Answers (Lords)
VAT AND THE RPI

Page retrieved: http://hansard.millbanksystems.com/written_answers/1988/jun/07/vat-and-the-rpi

HL Deb 07 June 1988 vol 497 cc1396-7WA 1396WA

Lord Bruce of Donington asked Her Majesty's Government:

How much the retail prices index as at 21st May 1988 would be reduced if VAT were changed from 15 per cent. to 8 per cent. and, on the assumption that this later rate remained unchanged for 12 successive months, what its effect would be on the annual rate of inflation.

1397WA

The Secretary of State for Trade and Industry (Lord Young of Graffham) It is estimated that the impact effect on the retail prices index (as at 21st May 1988) of a reduction in the rate of value-added tax from 15 per cent. to 8 per cent. would be a fall in the index of around 3.2 percentage points.

Assuming that the VAT rate remained unchanged, after 12 months the annual rate of inflation would return to its underlying level—for example, if the underlying rate were 4 per cent., a VAT rate reduction of this order would, if fully passed on in lower prices, reduce it to 0.8 per cent. for 12 months, after which it would return to 4 per cent.

Sorry RPIY excludes VAT.

I would bet my @ss that the VAT change will be adjusted for though, as it is a tempory mesure.

chucky

Dithering_Dad wrote: »

Oh dear, has !!!!!! been caught expounding another one of his half-baked ideas. Is Dopester still following the WTFian economic model?

Nothing much changes on the Housing board does it?

As an aside, I love reading !!!!!!'s posts these days, he contradicts himself almost in the same sentence or he comes out with the obvious WTFian economic statements like "Interest rates will fall and then rise, a bust will follow a boom, Winter will follow Summer".

He'll be saying "Rampant deflation will be followed by rampant inflation" next with poor old Dopester nodding along with him like Graham Taylor's stooge "yes boss, no boss" - though I still think Dopester's confidence in his messiah's message faltered when !!!!!! started talking about getting a BTL (and as we know BTL is another name for Satan in Dopester's book).

Just my quiet observation on the personal makeup of the housing boards, move along... nothing to see.

you're going to have to explain who Graham Taylor is to !!!!!! - maybe if he changed his avatar to a turnip

StevieJ

Really2 wrote: »

Sorry RPIY excludes VAT.

I would bet my @ss that the VAT change will be adjusted for though, as it is a tempory mesure.

I tell you what Really, credit where credit is due, you don't go down without a fight.

Really2

StevieJ wrote: »

I tell you what Really, credit where credit is due, you don't go down without a fight.

I don't.;)

But in the real world it will not cause any deflation or inflation.
I run a company my buy price and Sell price will remain the same all that will change is the amount of VAT we collect for the goverment.
We all know that CPI PRI etc are used to suit a cause.(and will be changed acordingly:))

In the real world the VAT drop will not cause deflation.

StevieJ

Really2 wrote: »

I don't.;)

But in the real world it will not cause any deflation or inflation.
I run a company my buy price and Sell price will remain the same all that will change is the amount of VAT we collect for the goverment.
We all know that CPI PRI etc are used to suit a cause.(and will be changed acordingly:))

In the real world the VAT drop will not cause deflation.

But Mr King warned there was a "long hard road ahead" to restore stability.
He said the Chancellor's cut in VAT meant it was now "very likely" that the UK would suffer negative inflation next year - but predicted the country would avoid a negative spiral of deflation.

I think most retailers will keep the same prices and pocket the Vat decrease, but try to make sure the inputs are cut by suppliers, thus increasing margins.

Really2

StevieJ wrote: »

But Mr King warned there was a "long hard road ahead" to restore stability.
He said the Chancellor's cut in VAT meant it was now "very likely" that the UK would suffer negative inflation next year - but predicted the country would avoid a negative spiral of deflation.

I think most retailers will keep the same prices and pocket the Vat decrease, but try to make sure the inputs are cut by suppliers, thus increasing margins.

We Agree their all small retailers will as it is to much hassle.

Short term inflation Really by SME's:D .
But If you think is it tesco that take £1 in every £10 spent buy the british consumer.
Their drop will be 1/10th of all trasactions done so I think as a %age 80-90 of turnover will have the %age applied.

purch

The price usually used is that for a cash transaction. This means that charges for paying by instalments or for use of credit cards, and discounts for paying by direct debit, are usually ignored
(though not always: some centrally calculated indices such as electricity charges measure the price of several different forms of payment) but discounts for paying by cash should be allowed for. Value Added Tax (VAT) and compulsory service charges are included.

Taken from CPI Technical Manual on the National Statistics Website

http://www.statistics.gov.uk/statbase/Product.asp?vlnk=2328

neverdespairgirl

Really2 wrote: »

But If you think is it tesco that take £1 in every £10 spent buy the british consumer.
Their drop will be 1/10th of all trasactions done so I think as a %age 80-90 of turnover will have the %age applied.

Won't quite a lot of Tesco's stuff be VAT-free anyway, though?

mewbie_2

neverdespairgirl wrote: »

Won't quite a lot of Tesco's stuff be VAT-free anyway, though?

Finally. Something in the thread I can get my teeth into. The rest of it went clean over my head - its either inflationary or deflationary... whatever. Anyway back to Tesco's. I had what I thought was an excellent idea today in terms of giving money and getting people spending. Instead of faffing around with this budget malarky which no one understands - why not give out 10 billion quids worth of expiry dated coupons for useless tat - ipods, hair straighteners, hair curlers, George Forman grill's, etc. Then we would have to 'spend' it.

By Mewbie - your friendly economics expert.

Really2

neverdespairgirl wrote: »

Won't quite a lot of Tesco's stuff be VAT-free anyway, though?

Most of the food items but they sell electrical items, blankets, tools etc have you not been to one in the last six years? they also have the online arm.
I don't think they could achive their figures on fruit veg and meat alone.