Marks & Spencer chairman Sir Stuart Rose has said he will pass on any VAT cut to shoppers, however the overall impact of the cut on consumer spending is expected to be marginal.
Sir Stuart Rose told The Sunday Telegraph that he would pass on the proposed temporary VAT cut of 2.5% to 15%, which the Chancellor Alistair Darling is poised to announce in his pre-budget report later today. Darling is expected to cut VAT in an effort to stimulate consumer spending.
Rose said: "If the Government reduces VAT, then we would absolutely pass it on to customers. Not doing so would be the equivalent of the banks not lending money."
However a 2.5% cut in VAT on clothing would have a limited effect on prices. For instance a Marks & Spencer women's mackintosh, which retails for £80, would have a VAT cut worth £1.70, making its new price £78.30. Other retailers believe that the reduction will confuse shoppers, particularly as much of the high street is already discounting by up to 25%.
Other retailers may choose to pocket the difference, to help ease cost pressures which are likely to build further next year.
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