ONS says that UK VAT cut will reduce RPI by 0.9 per cent

Office of National Statistics estimate (about 2 pages) that the reduction in the UK VAT rate and the offsetting increases in excise duties announced in the pre-budget report will reduce the Retail Prices Index (RPI) by 0.9 per cent, and the Consumer Prices Index (CPI) by 1.3 per cent.

Regulated elements of the electricity, gas, water and sewerage businesses across the UK have their price controls indexed by RPI but are able to recover the cost of VAT on their purchases, so their costs will not be reduced to the same extent (although it might be argued that the reduction in retail prices could tend to reduce wage increases).

For further information or advice please contact Franck Latrémolière.

Filed under ONS, Price controls.

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