That'll leave a mark

The IMF on Gordon Brown's cut in VAT (page 6-7) --

Some countries have already introduced, or are considering, temporary decreases in the value-added tax (VAT). If the termination date is credible and not too distant, the intertemporal incentives implied by such a measure are attractive, but the degree of passthrough to consumers is uncertain, and its unwinding can contribute to a further downturn. It is also questionable whether decreases in the VAT of just a few percentage points are salient enough to lead consumers to shift the timing of their purchases. Along these lines, larger but more focused incentives, such as cash transfers for purchases of new, more efficient cars, a measure adopted in France, may attract more attention from consumers and have larger effects on demand.

Less effective than what the French are doing ... of course the real reason for the VAT cut was to make the inflation numbers look good next year, a rationale not discussed by the polite IMF.

UPDATE: This (down in story) confirms that the Fund was referring to the UK.