Do We Really Need the VAT Hike?

Osborne’s budget has convinced the bond markets that this coalition is serious about tackling the deficit. The rally in gilts since the election and budget has been strong, taking 10-year yields down from 4% to 3% in three months, bringing down long term borrowing rates for mortgage holders and capital hungry growth businesses alike.

There has at the same time been a slew of negative-to-soft data on the economic front, given that the deficit cutting credibility of the government is firmly established, to the nigh on elation of the bond markets, Osborne has now earned a bit of leeway. Having already achieved fiscal credibility, if we do get more soft numbers on the economic front, he could afford to suspend the VAT hike due in January. If he goes ahead with the VAT hike and we do see a double-dip, Ed Balls will be well justified in blaming him for adding to the woes of the consumer. The VAT hike will take £13 billion of spending out of the economy.

David Smith, chairman of the Shadow Monetary Policy Committee group of independent economists, says his budget model calculates the move could increase unemployment by 235,000 over the next decade and reduce GDP by 1.4% over the same period. Do we really need to be reducing GDP at this time? The fiscal flagellation is no longer required to appease the gilt market…




Tip offs: 0709 284 0531
team@Order-order.com

Quote of the Day

Gavin Williamson overheard in Brussels…

 “What’s the point of listening to French politicians?”

Sponsors

Guidogram: Sign up

Subscribe to the most succinct 7 days a week daily email read by thousands of Westminster insiders.
Vaz Reported to National Crime Agency Over His Finances Vaz Reported to National Crime Agency Over His Finances
Bolton Sacked Bolton Sacked
Agent COB Was ‘Paid Informant’ Alleges Czech Spy Agent COB Was ‘Paid Informant’ Alleges Czech Spy
Sunday Show Highlights Sunday Show Highlights
No Facebook Engagement Drop Off Seen Here No Facebook Engagement Drop Off Seen Here
Adonis Tipped to Set Up Centrist Party and Be “British Macron” Adonis Tipped to Set Up Centrist Party and Be “British Macron”
Corbyn’s New Anti-Racism Campaign Star Sent N-Word, “Jew” and Hitler Tweets Corbyn’s New Anti-Racism Campaign Star Sent N-Word, “Jew” and Hitler Tweets
Corbynistas Openly Using McDonnell’s IRA Nickname Corbynistas Openly Using McDonnell’s IRA Nickname
Standard Deliveroo Love-In Standard Deliveroo Love-In
Gotcha! Commie Corbyn Gotcha! Commie Corbyn
Oxfam Failed to Ban Staff Using Prostitutes Because of “Civil Liberties” Oxfam Failed to Ban Staff Using Prostitutes Because of “Civil Liberties”
Labour MP to Voter: “P*ss Off” Labour MP to Voter: “P*ss Off”
EXCLUSIVE: May’s Chief of Staff in Late Night Porn Shocker EXCLUSIVE: May’s Chief of Staff in Late Night Porn Shocker
Equalities Commission Slams Labour… Again Equalities Commission Slams Labour… Again
Tory MP Plans to (Le)Go Big Online Tory MP Plans to (Le)Go Big Online
Terror Cops Probe White Powder Sent to Parliament Terror Cops Probe White Powder Sent to Parliament
McDonnell Mocks Labour Compliance Unit McDonnell Mocks Labour Compliance Unit
UKIP Plot to Make Muslim-Bashing Batten Leader UKIP Plot to Make Muslim-Bashing Batten Leader
Sun’s Tom Greatest Tosser in Westminster Sun’s Tom Greatest Tosser in Westminster
Coup Gaffe UKIP Chairman Resigns Coup Gaffe UKIP Chairman Resigns