George Osborne refuses five times to rule out VAT rise
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Version 0 of 1. George Osborne has declined five times to give a “cast-iron guarantee” that he would not raise VAT in the next parliament, saying only that there is no need to do so. The chancellor was tackled on his plans after Labour’s Ed Balls said Labour would rule out a rise in VAT in its general election manifesto and unveiled a poster warning of a Tory plan to increase the tax. During a session of the Treasury committee, Osborne was pressed by two Labour MPs, John Mann and Andy Love, to give an answer. Mann, the MP for Bassetlaw, even tried to hand the chancellor a Cornish pasty to give him strength to answer the question in an apparent reference to the 2012 budget in which Osborne tried to raise VAT on hot baked goods before being forced into a U-turn. However, Osborne refused to give a categorical guarantee, and instead repeated his position that he has no plans to increase VAT. The chancellor retaliated by saying he believed a Labour government would have to put up VAT, National Insurance or income tax if the party would not follow the Conservative plans for spending cuts. “I have identified where the £30bn of savings I believe need to come from and they don’t involve a VAT rise,” he said. “The question for those who say they are going to try to balance the books but say it mainly has to be done through tax, as the official opposition does, has to spell out what those big tax rises are. “And it’s pretty clear today that they have opened the door to a big increase in National Insurance and the ‘jobs tax’, and I think it would be very, very damaging for this country.” He said the Conservatives did not need to increase VAT. “I couldn’t be clearer. We do not need to increase VAT because our plans involve saving money on the welfare budget and government departments. “Your party is proposing very substantial tax rises; I suspect that will be VAT, or jobs or income tax. We now know from [the former chancellor] Alistair Darling’s memoirs that a Labour government was planning to increase VAT.” In response to Osborne’s dodging of the question, Balls said the chancellor had “let the cat out of the bag”. “Five times he was asked to make a cast-iron guarantee and five times he failed to do so. It’s now clear that the Tories are planning to raise VAT again,” the shadow chancellor said. “We’ve all heard the same old empty words about not having any plans before. It’s what the Tories said before the last election – and then they raised it within weeks of polling day. And it’s the same words Tory chancellors have used before elections for the last 40 years. “The next Labour government will not raise VAT. It’s an unfair tax which hits everybody and hits pensioners and the poorest hardest. And we can make this clear promise because all our pledges are fully funded, for example, a mansion tax to save our National Health Service. “But with their £10bn of unfunded tax promises and extreme plans for deeper spending cuts after the election, everyone knows the Tories will end up raising VAT to make their sums add up.” The Labour announcement ahead of its manifesto launch was designed to put pressure on Osborne before the hearing. Balls said Labour would stick to its record over the past 40 years of never raising the headline rate of value-added tax. In contrast, he pointed out that the Tories introduced VAT under Ted Heath in 1973 and raised the headline rate in 1979 and 1991. Before the last election, the Tory leader, David Cameron, famously said that he had “absolutely no plans” to raise VAT while the Liberal Democrats warned of a post-election VAT bombshell. Osborne raised VAT from 17.5% to 20% in his emergency budget of June 2010. The rise came into effect in January 2011. Balls has said he believes Gordon Brown’s refusal to accept his calls for a pledge not to raise VAT contributed to Labour’s defeat in 2010 and that he would “resign rather than break this promise”. The party’s new poster features the letters VAT as concrete blocks with a slogan “Don’t let the Tories hit you with this”. Labour has said the 2010 rise in VAT has cost families an average of £1,800 over four years. Treasury figures suggested a rise to 22.5% would cost a family with children an average of £450 a year and a pensioner couple £275 a year, Balls said. Danny Alexander, the Liberal Democrat chief secretary to the Treasury, sounded a similar note to Osborne. “Labour have no credibility on the economy. Ed Balls might be ruling out a rise in VAT but he can’t rule out a rise in National Insurance and already plans to hike corporation tax,” he said. “Because the Liberal Democrats have taken the difficult decisions to stick to a balanced recovery, under our future plans there is no need to raise income tax, National Insurance, VAT or corporation tax.” |