Wow – 2½% off VAT eh? Ooh, get the flags out. Not exactly the most exciting news ever but it should make a few items cheaper over the next few months.

The whole point of this and other possible tax cuts is not that Gordon and Alistair love us so much, it’s because they want us to start spending again. That’s the bottom line.

Should you do it? Well, it’s up to you. If you’ve got the spare cash and you were wanting to buy things for yourself and gifts for others at Christmas then yes, feel free to get things for less. However, if you’re in debt, don’t use it as an excuse to go out shopping and getting yourself into more debt and don’t allow it to sway you from your saving plan if you’re out of debt. Look after your own economy and the country’s economy will look after itself.

Our economy, like that of the United States and Ireland, has been far too dependent on consumers consuming for far too long. A whopping TWO THIRDS of it is consumer spending! How crazy is that?

How can it be right that the health of a country’s finances is dependent on that country’s citizens getting themselves into debt? Sure, we want to keep money swishing about in the economy to keep the ‘engine’ running, but if we need people to over-spend in order to keep the country profitable then there’s something very wrong with the way we are running things.

I keep saying it but I do still believe that as a nation we need to produce more, to increase our manufacturing base, not allow it to die a slow death, and to encourage agriculture. It’s understandable that we’ve gone so much into financial services because the profits (for the banks and for the country) are eye-watering. But I know from running businesses myself that if you depend on one big customer or one big service for the majority of your profit you are putting your business in a very vulnerable position. We’re seeing that happening now in this country.

Not only that, but this government has put us in a nightmare position by spending over-and-above the impressive tax revenues it was given over the last 11 years. I can't believe how many billions they have wasted on stupid and wasteful 'initiatives', quangos and pointless projects. In a way, I'm glad they're still in power so that they can take the flak. I know how the Icelanders feel, storming their parliament building, demanding that their politicians take responsibility for their neglect.

So by all means, make the most of discounts and a cut in VAT, but only if you can afford it and only if you were going to buy those things anyway. We’ve got lots of discounts (as always) in Bag a Bargain and in our Christmas for a Tenner articles, but we’re also into making presents (check out our hampers article and some great ideas on the messageboards) and giving free gifts (the gift of your time etc) for those on a very tight budget (and anyone who's sick of the consumerism of Christmas) and even having Christmas for free as you will see in our new article. If you haven’t got the money, don’t be fooled into spending it – even to help our economy. It's not going to help you out of your problems so don't go sacrificing your security for it!

Oh, and 45% tax on those earning more than £150,000 from 2011 – no big deal really. For a start, people on that rate should be able to afford clever accountants to soften the blow and secondly, 5% rise isn’t nearly as bad as it could be, if you remember the Super-tax of the 70’s. Not only that, but given the way the economy is going, I'm not sure that there will be that many people earning that kind of money by then anyway!

Ha! At last (really, at long last - I've been bleating about this for years) the Competition Commission has effectively stopped banks and other loan providers from conning borrowers into taking out PPI - Payment Protection Insurance - when they get a loan.

At last!

Really, this is something that loads of personal finance writers like myself have been calling for for years. Why it had to take this long I don't know.

Basically, PPI is supposed to kick in and pay your monthly loan repayments if you suddenly can't because of redundancy or sickness. Sounds like a sensible thing to get but

• loan providers made loads of money out selling these insurance policies with loans so many of them pretty much made it seem as though you wouldn't get a loan if you didn't take out the PPI that they were offering.
• there are lots of exclusions and limitations to these policies but most loan companies didn't mention those bits. For example, most PPI policies are useless if you work for yourself - if you lost work (as one does when running one's own business) the insurance company wouldn't pay up. Most are only interested if you have been employed and suddenly lost your job.
• the policies the loans companies offered are generally much more expensive than the ones you could get through a broker or by shopping around on a comparison site like ours.
• The cost was usually added on to your loan so it meant you had to pay even more each month to pay back the loan and the PPI.

The Competition Commission has clipped the wings of the lenders now by saying that they have to wait a full two weeks before contacting the borrower and suggesting that they take out PPI with them. This means that FAR fewer borrowers will say yes and it will stop unscrupulous lenders effectively forcing desperate borrowers to buy a policy with them just to get the loan. Great stuff!

Of course the insurance companies are moaning and saying that it will harm borrowers at a time when there are about to be a lot more redundancies. However, there's nothing to stop them getting their own, much cheaper, policy by looking on these comparison pages to find the best one.

You can do this for MPPI (Mortgage Payment Protection Insurance) too (it's the same sort of product) and save a lot of money by doing so!

We'll be running a new article this week on how to get the best payment protection insurance for your needs but if you're interested now, just check out our comparison and beat the banks!

This is the first time in my memory that all the media have been so much on the banks’ case about passing on the rate cut to customers.

The tabloids particularly are screeching warnings that they will ‘name and shame’ banks that won’t pass it on to borrowers. This has never happened before. Sure, money pages have run articles about the banks not passing on the cuts or rises to borrowers or savers, but this is the first time that the front pages have been full of warnings.

Quite right too. I think the feeling now is that we’ve personally bailed-out the banks with our tax money so they must do the decent thing and pass on cuts to us, in the form of lower lending rates. Of course, many of them will happily pass on the cuts in savings rates (apart from ICICI which, I notice, has made a big deal of keeping their very high savings rate – as well they might being a foreign-owned bank and therefore regarded with suspicion by savers). When it comes to loans, credit cards and in particular mortgages, though, only a few have (loudly) announced rate cuts.

I’m always against over-borrowing and I have been in accord with the MPC not cutting rates earlier on so that we didn’t have another borrowing bubble, but now that they have cut rates, I definitely think that the banks need to show themselves to be doing the decent thing and passing it on to home-owners, would-be home-owners and those trying to get themselves out of debt by switching to cheaper loans.

Of course, it’s one thing to bring headline mortgage rates down, though, and quite another actually to give these particular mortgages to prospective borrowers. Even where banks do bring down their standard variable rates, there’s no guarantee that everyone who applies will get them. That’s something that we should take note of too – how many people actually get the headline rates and how many are told they don’t qualify but could have a mortgage at a higher rate.

It’s a murky old world, the lending business.