Sir, The Chancellor’s extraordinary decision to temporarily lower VAT defies all economic logic. The change will be administratively expensive, do nothing to stimulate demand and leave few feeling any better off.

The modest price cuts seem all the more obscure in the context of an increasing risk of deflation.

Far better would be a blanket reduction in income tax at the lowest rate. This would leave people in no doubt as to how much better off they were and would most help those least able to cope with the current economic environment.

Simon Wolfson

Chief Executive, Next plc

Sir, Although it is tempting to provide a little bit of tax relief to everyone, the Pre-Budget Report will achieve nothing. The real answer to pump-priming the economy is to give more money to the middle classes.

Who is likely to go out and buy a new car if they have more money? The middle classes. Who will book a decent holiday or buy a big new flat-screen TV? The middle classes.

As soon as you earn more than £34,800, you are — bizarrely — regarded as rich and you start paying tax at the rate of 40 per cent. If the Chancellor really meant business, he should have raised the threshold for this tax band to £50,000 — which would immediately give all the people in this bracket a useful little windfall to go out and start spending.

Geoff Watson

Bristol

Sir, Whatever the rights and wrongs of introducing a new top tax band, surely no one will really be taken in by it as a genuine effort to address the state of our public finances. We are going to be paying for Gordon Brown’s public spending profligacy for years, if not decades to come. That burden will fall on us all, not just on those earning more than £150,000 a year. To pretend otherwise is deeply misleading.

Nick Green

Easterton, Wilts

Sir, What a difference a leak makes (report, Nov 24). In our shops for the past few weeks we had been trading 10 per cent down on this time last year, until an anticipated VAT reduction was leaked. Our shop sales then fell to 40 per cent down on the day, because hardly anybody went shopping when there was an expectation everything would be cheaper a few days later.

Everybody thinks that a 2.5 per cent reduction in VAT will mean a 2.5 per cent reduction in the price. It doesn’t. It works out at a 2.13 per cent reduction. Ask a young shop assistant to work that one out when a customer is waiting at the till.

Lynn Lewis

Chairman, Nauticalia Ltd

Sir, Why does Alistair Darling not realise that a 2.5 per cent (or 2.13 per cent) cut in VAT will have a very marginal impact on consumer spending? If one were considering, for example, an LCD flat-screen TV that cost £400, would the price falling to £391 make you think differently about buying it? I think not.

B. J. Mulady

Uckfield, E Sussex

Sir, What the Chancellor does not seem to realise is that the public need to be treated like children. Give them extra pocket money and they will spend it; tell them that the sweets in the shop are now cheaper, and they will say: “So what, I’ve got no money anyway.”

David Shamash

Wantage, Oxon

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