Labour should pledge not to raise VAT

A promise not to raise this regressive tax would hand Brown one of the "dividing lines" he craves.

As well as being the day that Gordon Brown finally announced that an election would be held on 6 May (he accurately described it as "the least well-kept secret of recent years") today is also the day that the new 50p tax rate comes into force.

It's not a bad day for this to happen. The new top rate of tax, like the one-off tax on bank bonuses, is one of the most popular policies Labour has adopted in recent years. A YouGov poll found that 68 per cent of voters support the introduction of the 50p rate.

With the economy defining this election like no other, the parties' tax pledges will come under even more scrutiny than normal. Cabinet ministers, led by Ed Balls, have challenged the Tories to admit that they will need to raise VAT to plug the deficit.

George Osborne has insisted that he has "no plans" to increase VAT, but this is clearly a non-denial denial. As Sunder Katwala reminds us, the former Tory chancellor Geoffrey Howe similarly declared that "we have absolutely no intention of doubling VAT" during the 1979 campaign, and then did just that. Later, it was the Major government that raised VAT by 2.5 per cent to its current level of 17.5 per cent.

But until Labour issues a copper-bottomed guarantee that it won't do the same, the party's attack on the Tories won't win over any voters.

The Labour manifesto, a preview of which appears in today's Guardian, should contain such a pledge. A promise not to raise the most regressive tax of all would emphasise Labour's commitment to fair taxation and would hand Brown one of the "dividing lines" he so craves.

The Tories' promise to reverse part of the government's planned National Insurance increase kick-started their faltering campaign. A promise not to raise VAT could do the same for Labour.

Follow the New Statesman team on Facebook.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

The 5 things the Tories aren't telling you about their manifesto

Turns out the NHS is something you really have to pay for after all. 

When Theresa May launched the Conservative 2017 manifesto, she borrowed the most popular policies from across the political spectrum. Some anti-immigrant rhetoric? Some strong action on rip-off energy firms? The message is clear - you can have it all if you vote Tory.

But can you? The respected thinktank the Institute for Fiscal Studies has now been through the manifesto with a fine tooth comb, and it turns out there are some things the Tory manifesto just doesn't mention...

1. How budgeting works

They say: "a balanced budget by the middle of the next decade"

What they don't say: The Conservatives don't talk very much about new taxes or spending commitments in the manifesto. But the IFS argues that balancing the budget "would likely require more spending cuts or tax rises even beyond the end of the next parliament."

2. How this isn't the end of austerity

They say: "We will always be guided by what matters to the ordinary, working families of this nation."

What they don't say: The manifesto does not backtrack on existing planned cuts to working-age welfare benefits. According to the IFS, these cuts will "reduce the incomes of the lowest income working age households significantly – and by more than the cuts seen since 2010".

3. Why some policies don't make a difference

They say: "The Triple Lock has worked: it is now time to set pensions on an even course."

What they don't say: The argument behind scrapping the "triple lock" on pensions is that it provides an unneccessarily generous subsidy to pensioners (including superbly wealthy ones) at the expense of the taxpayer.

However, the IFS found that the Conservatives' proposed solution - a "double lock" which rises with earnings or inflation - will cost the taxpayer just as much over the coming Parliament. After all, Brexit has caused a drop in the value of sterling, which is now causing price inflation...

4. That healthcare can't be done cheap

They say: "The next Conservative government will give the NHS the resources it needs."

What they don't say: The £8bn more promised for the NHS over the next five years is a continuation of underinvestment in the NHS. The IFS says: "Conservative plans for NHS spending look very tight indeed and may well be undeliverable."

5. Cutting immigration costs us

They say: "We will therefore establish an immigration policy that allows us to reduce and control the number of people who come to Britain from the European Union, while still allowing us to attract the skilled workers our economy needs." 

What they don't say: The Office for Budget Responsibility has already calculated that lower immigration as a result of the Brexit vote could reduce tax revenues by £6bn a year in four years' time. The IFS calculates that getting net immigration down to the tens of thousands, as the Tories pledge, could double that loss.

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

0800 7318496