The Chancellor’s announcement today of a VAT reduction on theme parks and children’s meals has been hailed as a victory for British families. But as with any tax break, the sceptic must ask: who really pays? The government claims this will lower the cost of family outings, offering a timely boost to the hospitality and leisure sectors.
Yet the arithmetic is suspect. A short-term cut in consumption taxes may stimulate demand, but it is likely to be inflationary if supply cannot keep pace. Moreover, the foregone revenue must be recouped elsewhere.
With the national debt already north of £2.5 trillion, this is fiscal legerdemain, not prosperity. Gilt yields have barely budged, suggesting bond markets are unmoved.
The real question is whether this will spur productivity or merely subsidise a day out. Savers, as always, will bear the brunt of the inflationary tide. One fears this is a vote-buying exercise dressed as economic policy.
The Chancellor’s arithmetic does not add up.
