Brown's Economic Mistakes

Osborne on President Sarkozy criticism of Brown's economic "mistakes"

Responding to French President Nicolas Sarkozy's comments that he would not repeat Britain's economic "mistakes", and that the Prime Minister's VAT cut had "absolutely not worked", Shadow Chancellor George Osborne said:

"President Sarkozy is the latest international leader to condemn Gordon Brown's main policy for tackling the recession.

& 147;We said at the time that Brown& 146;s flagship VAT cut would only make things worse and would be an expensive failure. That view is now echoed not just by British retailers, but by foreign governments, including France, Germany and Holland.

& 147;Gordon Brown claims to have saved the world. It would appear that world leaders increasingly disagree.

Retailers criticisms of VAT cut

Justin King, CEO of Sainsbury's: "It is incredibly complex and difficult to do. This is not a simple thing. And I think that you'll find that a lot of smaller businesses find that the cost of doing this outweighs the benefit that they're able to offer their customers."

(David Dimbleby): "But if they do reduce it by 2.5 per cent, is that going to make any difference?"

JK: "Well I don't think in the context of competitiveness of what& 146;s going on in retail today that it will, no. If we walk down the high street today, you& 146;ll see 20 per cent off, 30 per cent off, 50 per cent off. So really, in that context, it's a drop in the ocean. And certainly, from our perspective, we felt there are different ways that money could have been invested to encourage consumers back into the shops." (Question Time, 27 November 2008)

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Sir Stuart Rose, CEO of Marks and Spencer. Sir Stuart said that the VAT decrease had "not made a material difference to our sales" (BBC News Online, 7 January 2009)

International criticism of VAT cut

Oliver Blanchard, Chief Economist of the IMF: & 145;Temporarily cutting VAT, a measure that was adopted in Great Britain, does not seem to me to be a good idea... 2 per cent less is not perceived by consumers as a real incentive to spend'' (The Daily Telegraph, 24 December 2008)

Wouter Bos, Finance Minister of the Netherlands "Lowering the value added tax I think was not a very wise thing to do. I don& 146;t believe it will contribute to a recovery of the economy, whereas it does put pressure on other countries to do the same. It& 146;s that type of policy response where I would have liked to see a bit more coordination." (Financial Times, 3 February 2009)

Jean-Claude Juncker, Prime Minister of Luxembourg : "To say that VAT will go down and then put it up shortly after is not going to produce the desired effect," (2 December 2008, Deutsche Welle)

Peer Steinbrueck, Finance Minister of Germany: "Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90? All this will do is raise Britain& 146;s debt to a level that will take a whole generation to work off. The same people who would never touch deficit spending are now tossing around billions. The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking. When I ask about the origins of the crisis, economists I respect tell me it is the credit-financed growth of recent years and decades. Isn't this the same mistake everyone is suddenly making again, under all the public pressure?" (Newsweek International, 10 December 2008)

Christine Lagarde, French Finance Minister: "As far as we're concerned...we're not certain that when prices go down, a VAT reduction is that effective" (BBC, WATO, 26 November 2008).

Carsten Schneider, German Social Democrat Budget Spokesman: "I think the sales tax cut is counter-productive" (The Independent, 13 December 2008)

Brown on President Sarkozy

"Nicolas, you have reminded us on this visit of your energy, your ideas, your insights into the great global challenges that we face" (Press Conference, 27 March 2008) & 145;President Sarkozy [who] has been a great friend of the country& 146; (Press Conference, 8 December 2008)

& 145;the President of the European Union and President of France, my friend Mr Nicolas Sarkozy& 146; (Press Conference, 8 December 2008).