Erikka Askeland: Taxing your mind over panic buying before hike in VAT is a false economy

Actually the panic is overdone. The rise in sales tax on the handbag I may or may not have a chance to buy before 4 January will not even pay for the cup of coffee I will undoubtedly splash out on as a post-retail treat. When a shopper realises the tax rise on a 100 item will bring the total cost up from 117.50 to 120 (in effect a 2.1 per cent rise) it makes it a bit easier to relax and leave the queues to those less prone to rational thinking.

But shopping behaviour is seldom rational, a tendency exploited by retailers since the first traders offered a two-for-one deal on mammoth tusks (buy now, before supplies are extinct!).

Sure, buying larger, more expensive items will make the increment add up. Which is why there has been anecdotal evidence of people rushing to the high street for such necessities as large-screen 3D TVs.

The post-Christmas rush that has been putting smiles on the faces of retailers in the UK and the US has already been labelled the "last hurrah". The argument goes that people are buying now so when they lose their jobs/houses/savings in 2011 they will be able to comfort themselves in the warm glow emitted by their widescreen, or bulk buy tins of discount baked beans in designer court shoes.

This compelling story reveals the fears inside the typical Briton of his/her prospects for 2011. And, quite frankly, these are a little scary. The price of food and petrol is heading up, wages will remain tight as the number of job seekers swell, the banks remain fragile as property prices continue to deflate and there are likely to be more pictures of angry students rioting in the streets on our TV (wide) screens .

But while concerns about the economy and its impact on the undoubtedly poorer people of Europe and North America is rational, we are in more danger of the gloom and fear these engender getting out of proportion.

There is a rational response to looming tough times - cut down on spending, brush up your CV, wear a jumper, preferably an old one. Worrying about the end of the world as predicted by the Mayan calendar, building a bomb shelter - or waiting outside a shop in sub-zero temperatures for hours is not. So the response to the VAT rise is also overwrought.

It was only two years ago that Alistair Darling beetled his lowering eyebrows at the emerging recession and announced a cut back in VAT to 15 per cent as part of a fiscal stimulus package.

Although the 13-month reprieve was calculated to be worth about 275 to the average UK household, there was much shrugging as commentators said such a wee sliver off the VAT rate wouldn't make a blind bit of difference. There was also outrage coming from retailers - who one might think would welcome a tax cut with whoops of joy.But they branded the tax cut a "logistical nightmare".

And it's true that constant tinkering with the rate of retail tax is a headache. A blog by Emily Coltman, a qualified chartered accountant, only gives proof to how tedious it is for anyone providing goods or services. She reminds us that the VAT fraction changes from 7/47 to 1/6, which means that while a mug costing 7.99 netted the seller 6.80, as of Tuesday the same price gets 6.66. And what follows is fiddling with tills, changing price stickers, adjusting forecasts, etcetera.

The VAT rise is certainly another straw on a camel that is looking decidedly ropey, but nor will it be the back breaker people fear. Instead the increase brings the UK more in line with France, with a tax of 19.6 per cent, and Germany, at 19 per cent. Retailers may use it as an excuse for repricing, but this will only amount to small adjustments on the tweaks back to 17.5 per cent last year and the previous year's cut to 15. Consumers will quite reasonably be tightening their belts in the coming year but to blame it all on a 2.5 per cent tax rate rise would be nonsense.

Like Delphi, oracles are often unintelligible to put it mildly

PREDICTIONS are so fun at this time of year. And they are almost all completely unreliable, or when it comes right down to it, unthinkable. The trick is to pick your oracle.

Think of the economist Nouriel "Dr Doom" Rubini, who was largely credited with getting the whole "the Western economy is rubbish" thing right. Since that amazing party trick he has been predicting a long, slow recession. No prizes there, then, Dr Doom.

Others have attempted to predict such terrible and incredible things like the collapse of the euro or Andy Murray winning Wimbledon. Damn thing is we'll just have to wait to see who is right.