Knowing and Making

One of my themes in the last few weeks has been the credibility of UK fiscal policy and how it can be rescued now that the rules of the last ten years have been clearly broken. If your husband has an affair, before you believe his assurances of renewed fidelity, he needs to give you a good reason to think it will be different next time. If this is his second or third sin (after those drunken incidents in the 1970s and early 90s) he needs to be extra convincing. Alistair Darling is in the same position. So how will today's announcements go down? Will anyone believe them? There are five criteria it has to meet to be credible. The first step is that it must have content - there needs to be something concrete to actually believe. Something simple that nobody can forget. "I will never see that woman again" is a good one, and "We will reduce borrowing every year and eliminate it by 2015" comes in a reasonable second place. Marks: 4/5 The second is to make it plausible...

One of the main expectations from this afternoon's pre-budget report is of a temporary cut in the rate of VAT. If true, what effects will this have? Creating extra work for accountants and software developers . This would be the first change in VAT since 1991, and the economy is a lot more complex and automated than it was then. My own programmers are on standby to update and check all our clients' systems if the change goes ahead. We are hoping to have a few days' or weeks' notice of the change so that we have time to do this. Accountants, similarly, will have some extra work to check that their clients have changed the rate they apply and correctly dealt with invoices which might straddle the effective date of the change. Administrative overhead for retailers . There will be work for retailers in changing prices - and particularly in reconsidering non-granular price points such as £1.99 or £5. Many retailers may not reduce prices but will increase profit margins inste...