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VAT cut didn't prompt consumer spending

The cut in VAT to 15% from 17.5% had little impact on consumer spending, according to a survey by PricewaterhouseCoopers (PwC).

PwC interviewed 2,000 consumers and found 88% said that the VAT cut had not prompted them to spend more on goods or services.

The VAT cut was deemed as insignificant in comparison to other economic factors consumers were faced with, including reduction in income and economic uncertainty.

Dealers are hoping that if the scrappage scheme is not extended, the rise in VAT on January 1 will prompt sales towards the end of the year as customers try and get cars at the cheaper tax rate.

Stephen Coleclough, tax partner at PwC, told The Guardian: "These figures show that, despite it being designed as an economic stimulus, the vast majority of consumers' spending has been unaffected by the VAT cut.

"The rest of the year will demonstrate whether the cut can still have the desired effect. It will be interesting to see whether consumer spending is affected by retailers potentially bringing forward their new year sales in anticipation of a VAT increase in January."

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