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The 2.5 per cent reduction in VAT comes into force today but there is debate over how many retailers will pass on the savings and whether it will help boost the economy.

Music and DVD retailer HMV confirmed it will be passing on the VAT reduction in full to its customers from Monday.

A spokesperson said: "Although we are passing on the VAT reduction at the point of sale, the re-stickering of our entire stock would represent an enormous undertaking for our sales staff at this very busy time of year, so the prices shown on our product packaging will, for the time being, remain unchanged.

"There is no VAT on books in the UK, and so pricing on books in Waterstone's remains unchanged."

Boots has also confirmed it will be passing on the tax cut, although admitted it would be a "technically complex" issue to change all the prices throughout its 2,600 stores.

However, not all stores will pass on the discount, analysts warn.

"Re-ticketing items is an expensive and complex exercise and with retailers wanting to maintain pricing practices such as price points ending in 99p or whole pounds, not all prices will change," said Nick Gladding, lead analyst from Verdict Research.

"The prices of the cheapest goods are least likely to be revised, with retailers making bigger adjustments to lines where they hope to secure competitive advantage.

"The picture is further complicated by the high level of discounting already being deployed – with consumers not responding to the VAT-related reductions as much as they would if they occurred outside the Christmas and New Year season," Mr Gladding added.

The British Retail Consortium has also advised consumers that some prices are likely to go up – the falling value of the pound means imported products will become more expensive.

Accountants KMPG estimates a 2.5 per cent VAT rate cut is the equivalent of a 21p reduction in every £10 of standard rated VAT inclusive expenditure. Deloitte meanwhile estimates an average £50 shopping basket – with goods with and without VAT - will be 53p lighter now.

The BRC estimates the 2.5 per cent VAT cut will result in a reduction in prices of around 2.1 per cent, due to the way VAT is calculated.