Macroeconomics: UK economy, IB Economics

The Chancellor's Summer Statement offered restaurants a temporary VAT cut from 20% to 5%, and a number of leading chains - KFC, Nandos and Pret - have agreed to lower prices.

However, it's easy for large chains with substantial cash reserves to pass on VAT. Smaller chains aren't necessarily passing on the cut, but using it to shore up their finances. 

It's interesting to see the distributional consequences of this - is the temporary VAT cut designed to support businesses or increase consumer demand. Or both.  

One of the more interesting aspects of the Summer Statement is the Chancellor's 50% discount on eating out - but only Monday to Wednesday. It's caused disagreement: the hospitality sector are pleased, but others are angry that money is being offered to encourage to people to eat out when others are unable to eat enough, or sufficiently healthily. 

From a microeconomic point of view, this looks like a subsidy - albeit a limited one, in that it will only be offered for 13 days during August. From a macroeconomic view, it's helping an under pressure sector, but it does seem to have adverse distributional consequences. 

The Guardian's critical coverage of the Summer Statement, illustrated with a lovely example of labour market flexibility, which highlights the criticisms of yesterday's job retention bonus. 

There are a number of people who think that yesterday represented a sticking plaster, and that it won't allow the UK economy to avoid mass unemployment further down the line.  

A handy guide to the Chancellor's Summer Statement highlighting what's going to the furlough scheme, temporary tax cuts - for VAT in the hospitality sector and Stamp Duty - a Green Homes Grant, and help for young workers.