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Consumers’ pain is the Chancellor’s gain

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    The worrying thing is that ed balls had in the past suggested raising the 5 % to a higher level – presumably that would now be 20%!!

    I used to work on the water industry and in one price review an economist from a major consultancy argued that water is price elastic. Raise price and consumption goes down; true to a point. There is a reservation level of demand where household cannot consume less. The same applied to gas and electricity. 20% vat may reduce demand in the short run but over time it will go back to normal levels and only the HMT benefit .

    With all the environmental taxes on energy there is little point ( except for C oE) on having vat!


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