My attention now draws to the issue of how to help people during these hard times and one particular issue has come into sharp focus: The VAT issue! The reduction in VAT from 17.5% to 15% will have minimum effect on the spending behaviour of consumers. I rather like the proposal by Mr Cameron to differ VAT payment for small and medium businesses for up to 6 months. If we discard politicking, then this will have significant benefits to small businesses and jobs, who are after all suffering the aftermath of the excesses of the Banks. I suspect the PM is aware of this in any case.
A stroke of genius
As we move into the new year and the recession starts to bite even harder, it will be a stroke of genius if the PM and his Chancellor introduces this VAT deferral scheme. The scheme might work like this:
- Small and Medium companies have their VAT differed for 6 months
- At the end of the 6 months, if the VAT are not paid, then interest is charged at the Bank of England lending rates.
- Small companies will have to spend money (which will stimulate the economy) to take full advantage.
- Government will be lending money to small business through the 'backdoor' at a time when the Banks are busy building up their reserves and are less willing to support small businesses with cash.