The 2.5 per cent VAT rate cut announced by the government in its pre-budget report is unlikely to have a significant affect on the prices paid by consumers, it has been claimed.
According to Defaqto, prices for products such oil are already falling and it is expected that electricity and gas may follow suit.
Therefore, the VAT reduction may not make much of an impact.
Similarly, the high street is seeing many shops introduce sales and price reductions so the 2.5 per cent cut may also prove to be insignificant for shoppers.
However, Michael Baxter, economist at Defaqto, thinks retailers could benefit from the announcement.
"Presumably it will help the retailers though because if they don't pass the price cuts on and therefore they have slightly higher margins I suppose slightly less retailers will go bankrupt in the New Year," he said.
In his pre-budget report chancellor Alistair Darling claimed that he expects inflation to come down sharply by the end of next year.
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