Next chief executive Simon Wolfson has criticised the Chancellor’s decision to temporarily cut VAT to 15%, describing it as an extraordinary decision which ‘defies all economic logic’ and which will ‘do nothing to stimulate demand’.
In a letter to The Times newspaper, Simon Wolfson said: “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.”
Wolfson went on to add: “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.” Next has confirmed it will be passing on VAT cuts to consumers.
Marks & Spencer chairman Sir Stuart Rose has said he “absolutely” would pass the cut on to consumers. John Lewis chairman Charlie Mayfield also said he would also reduce prices at the department store.
The British Retail Consortium yesterday welcomed the VAT cut, which comes into effect on December 1, and which will last for 13 months. However, the BRC warned it would be complex for retailers to change their systems quickly enough to pass on price reductions to consumers by next week.
BRC director general Stephen Robertson said: “This [VAT cut] is a modest but welcome boost for hard-pressed households. It must be just one of a range of reviving measures including cuts in income tax and interest rates. Getting the economy up and running is vital and, in this fiercely competitive climate, our members will certainly be passing this on.”
However he added: “Shops will cope, but implementing a new VAT rate in just a week will be exceptionally difficult for customers and retailers at their busiest time of year. IT system changes, replacing shelf labels and stickering-over prices on packs will be a mammoth and costly task. Staff will inevitably be diverted away from serving customers. Small retailers will find all this particularly difficult to accommodate.”