Everyone’s been bandying round the recession bomb for the last year. But the UK wasn’t actually officially in recession. Officially a recession is two successive quarters of negative growth and today the inevitable has happened, the first since 1991. The announcement finally pours cold water on Gordon Brown’s 1999 pledge in his Pre-Budget Report that ‘Britain will not return to the boom and bust of the past’. We’ve had the boom, now hold on tight, here comes the bust.

So what does this mean? Nothing really, we’re just now allowed to use the term recession in the sense it was intended. The same economic climate prevails now we just have a nice little semantic bow with which to tie it up. What is worrying though is that the UK economy contracted by a worse-than expected margin - 1.5%. This is despite the reduction of VAT, bank bailouts and the financial stimulus package.

Other nice little statistics to make you grab for the razor blades is that GDP has had the largest drop since the dark days of 1980. In 1980, Britain was still recovering from the winter of discontent when there were mass-strikes and PM James Callaghan almost bankrupted the country. The parallels between then and now are indeed worrying to say the least.

As they say misery loves company and the UK can join the US, Japan and Germany who are also in recession. This is unlikely to be an exclusive group and membership is sure to swell in the coming year.

As well as recession, fall in GDP, there is another little issue: the pound hit a new low of $1.35. For anyone who has been abroad in the last month, the pound’s weakness in comparison to other countries will be of no surprise.

But don’t get too down, this novelty humping dog should cheer you up.

Following on from the pre-budget report, VAT has been reduced to 15% a 2.5% drop from the previous 17.5% level. This is part of Brown’s financial stimulus package aimed to encourage shoppers to keep spending. It’s not Dig for Victory any more, more like Spend for Victory. Do the patriotic thing and buy something today and make the most of the cheaper prices.

Currys are already advertising their new savings on offer after the reduction in VAT from 17.5% to 15%. A woman questioned on News Night last night seemed thoroughly unimpressed when asked about the discount. “That’s only £2.50 in every £100,” she said. However for expensive items such as white goods, cars and furniture this reduction will represent a nice saving. Although the VAT reduction starts on the 1st of December, Currys are already offering the discount to their customers.

The VAT reduction starts on the 1st of December 2008. The rate will stay at 15 per cent until 1 January 2010. This is in keeping with the government’s plans for a financial stimulus. By reducing VAT for the next year they are trying to encourage consumers to keep spending to keep the economy healthy.

Source: HM Revenue & Customs

The chancellor Alistair Darling has slashed VAT by 2.5% in a bid to resuscitate the moribund British economy. By targeting VAT as opposed to reducing tax, Darling is trying to encourage people to spend money rather than save it. If he reduced income tax or other forms of tax people it is likely most people would save it. To get Britain out of its economic slump Darling needs people to start spending. The immediate effect for consumers will be a reduction in all prices except for food which is exempt from VAT.

Combined with a reduction in VAT and the spate of pre-Christmas sales, it’s a great time to find yourself a bargain on the high street or online. To keep track of online prices set up an Invisible Hand Price Alert to be informed as soon as a price drops.