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VAT reduction must be passed on to consumers

And now for some good news. Today the lower VAT rate on most labour-intensive services and some goods is reduced from 13.5pc to 9pc. Among the products benefiting from the lower VAT rate will be restaurant meals, hotel accommodation and newspapers.

The VAT cut is part of the Government's "Jobs Initiative", which was unveiled in May.

While many of us would quibble with the Government's decision to fund the "Jobs Initiative" through a raid on private pension funds, now that the die is cast it is imperative that the lower VAT rate is passed on.

With consumers strapped for cash it is vital that the lower VAT rate translates into lower retail prices rather than being pocketed by suppliers in the form of higher profit margins.

This means that consumers must be on their guard to ensure that they are not ripped off. They should not be afraid to insist on lower prices. It is only by doing so that the lower VAT rate will give the economy the shot in the arm it so desperately needs.