The VAT cut conundrum

The VAT cut conundrum

Good news has never been so hard to deliver. Literally. The Chancellor’s decision to slice 2.5% off VAT has left the mobile industry with a conundrum. Do they shave all their prices, creating huge amounts of work for arguably little visible impact? Or do they pocket the difference and risk the wrath of the Chancellor and the indignation of the public, who will brand them selfish pariahs just like the banks?
 
We need all the help we can get at present to keep the tills ringing and keep business moving. But the cut has done more to massage the public mood than tip the scales in favour of more spending. When it comes down to it, if something cost £19.99 last week, even with a price cut it’s only £19.49 this week. Then there are the practical problems this little change throws up. The billing issues of rapidly adjusting pricing scales must be enormous for operators, especially given the creaking state of their billing systems. Given that all this has to go through by Monday, time is not on the networks’ side. The opportunity for glitches affecting customers’ monthly contract bills is larger than they would like.

For retailers too, re-pricing could be a logistical nightmare. I’m imagining store staff spending the weekend grudgingly going through stock rooms re-pricing kit, and being marshalled by zealous managers to sticker up brochures with the new deals. Some general retailers plan to pocket the 2.5% or divert it into special deals, as there is no legal requirement to pass on the cut. That would be foolish: this is a battle to re-ignite customer confidence and those organisations will be accused of undermining the war effort.

So it’s back to the trenches, down with prices, and remember what Tesco tells us: every little helps.

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