Britannia Radio

While they were having this debate the markets gave a big 'thumbs 
down' to Brown's plans by causing a massive fall in the Pound against 
the euro.  It closed at £1=£1.0775  or 92.8p for ?1.

The Telegraph headline story is:
"Pound sinks to new low against the euro
Sterling has plunged to a fresh low against the euro, with most 
travellers now getting less than one euro for each pound that they 
exchange at a currency booth".

We asre nearing the tipping point where Brown-Darling will be unable 
to auction off government debt to finance their massive borrowing.

The debate saw some intelligent talk from LibDem Vince Cable, Tory 
Philip Hammond, and Labour Frank Field and Lord Jones.

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BBC ONLINE   17.12.08
MPs reject bid to reverse VAT cut

MPs have rejected attempts to scrap the 2.5% VAT reduction which came 
into effect this month.

Lib Dem MP Vince Cable led attempts to overturn the temporary cut, 
which he said was "seriously defective" as a way of getting money 
into the economy.

His bid was backed by the Tories and Labour ex-minister Frank Field 
but was rejected by 303 votes to 223.

Ministers say the VAT cut is "right for the UK economy" but former 
minister Lord Jones has also criticised the cut.

The Lib Dems moved a motion to annul the reduction in VAT from 17.5% 
to 15% until the end of 2009, a move designed to boost consumer 
spending.

Contentious measure
It came into force on 1 December. Had the government lost the vote 
ministers would have been under pressure to respond immediately and 
confirm whether it would be reversed.

Opening the debate, Mr Cable said he agreed with the concept of a 
fiscal stimulus but said the VAT cut "was a bad one".

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  I believe cuts in VAT is likely spitting in the face of an economic 
hurricane
Frank Field, Labour backbencher
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He said tax cuts and increased public investment would be a better 
way of putting money into the economy and pointed to the 
administrative costs on smaller businesses of implementing the cut.
In a reference to Chancellor Alistair Darling's explanation in the 
pre-Budget report about why the VAT cut was the best option, Mr Cable 
told MPs: "Our view is that this isn't the best, isn't the fairest, 
it won't help everyone and it certainly won't give back £12.5bn back 
to consumers."

'Ineffective'
He questioned how much a 2.5% drop would be likely to influence the 
behaviour of a "rational consumer" and said the effect was 
"invisible" at a time when shops were already discounting goods 
"aggressively".

Philip Hammond, for the Conservatives told MPs the VAT cut was "the 
prime minister all over, unaffordable and ineffective".

He said Mr Brown was committed to a "reckless exercise that will 
increase debt through yet more borrowing" to fund a temporary VAT cut 
which nobody but Mr Brown thought would be effective.

The temporary cut would have to be followed by a "massive increase" 
in taxation which would threaten any recovery, he said.

Labour MP Mr Field, who led a backbench rebellion against the 
abolition of the 10 pence tax rate earlier this year, told MPs he 
would vote against the government.
"I believe cuts in VAT is likely spitting in the face of an economic 
hurricane I don't believe it will have any effect whatsoever, given 
that firms are already cutting prices by up to 50% in an attempt to 
survive," he said.

£20 saving
He told MPs "nobody doubts" the government's intentions [I DO, Mr 
Field! -cs] to protect people from the economic downturn but said 
many businesses faced closure, threatening more jobs.

"I believe unless we radically change the credit life lines to many 
firms, there will be a considerable number of our constituents who 
will not have firms to go to after Christmas."

The VAT cut was also criticised later in the House of Lords by Lord 
Jones - a crossbencher who stepped down as trade minister in October.

He asked why "it has been necessary to spend £12bn of taxpayers' 
money by knocking 25p off a Christmas present through VAT and not 
putting it in to ensure that we actually preserve people in jobs in 
this country".

For the government Mr Timms said the VAT cut was a fair way to 
deliver money to the economy because low income households spent a 
larger share of their income on VAT than richer households.
He also said tax cuts would not help those who do not pay income tax, 
such as pensioners.

The average household spent £900-a-month on VAT-rated goods and 
services and would save around £20 a month, he said.
He said the Conservatives would "turn their backs on families and 
businesses".

"This is the right stimulus for families, it's the right stimulus for 
businesses and it's the right stimulus for the UK economy," he said.

Ministers say the VAT cut is just one of a number of measures 
announced in recent months to help businesses and families through 
the downturn.

The VAT row intensified last week following criticism of Gordon 
Brown's economic policies by two German politicians