Balls’s smart move on VAT

Ed Balls’s decision to oppose any rise in VAT is smart politics and smart economics.

Ed Balls's bold claim that ruling out a rise in value-added tax would have saved Labour from defeat in the election is rather wide of the mark. With the electorate inherently sceptical of tax pledges by politicians, such a promise would never have shifted many votes.

But there was then and is now a principled argument for opposing any rise in this most regressive of taxes. By staking out a clear position ahead of next week's emergency Budget, Balls has invited his rival leadership candidates to follow suit.

I'd be surprised if the coalition chose to raise VAT this early in its lifetime, but with the new Office for Budget Responsibility poised to downgrade Labour's growth forecasts, George Osborne might believe he has found a justification.

In fact, should growth be weaker than expected, few responses could be worse than increasing VAT. A rise in the tax would not only hit the poorest, who spend a disproportionate amount of their income on basic goods, hardest, it would also suck vital demand out of the economy.

A recent report for the Centre for Retail Research found that raising the VAT rate to 20 per cent would cost each household £425 a year on average. It added that the resultant drop in consumer spending could cost 47,000 jobs and lead to the closure of almost 10,000 stores.

Balls doesn't cite these figures, but he is right when he argues:

It would be economic madness to raise VAT -- on top of the spending cuts the government has announced. Raising VAT will either depress spending and stifle growth, increase prices and stoke inflation, or be absorbed by the struggling retail sector.

But as well as being smart economics, opposing a rise in VAT is smart politics. Along with electoral reform, tax is one of the most potentially disruptive internal tensions within the coalition.

Should the government raise VAT while backtracking on its plan to increase capital gains tax significantly, Balls's intervention will look prescient.

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George Eaton is political editor of the New Statesman.

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Labour MP Sarah Champion resigns over grooming gang piece in The Sun

The shadow equalities minister is standing down after her controversial article sparked accusations of racism.

Sarah Champion has resigned as shadow equalities minister over her incendiary article about grooming gangs in The Sun.

The Labour MP for Rotherham caused controversy by writing a piece about the Newcastle paedophile ring, which the tabloid headlined: "British Pakistanis ARE raping white girls... and we need to face up to it".

This sparked accusations of racism, including from figures in her own party. Naz Shah, the Labour MP for Bradford West, wrote in the Independent“Such an incendiary headline and article is not only irresponsible but is also setting a very dangerous precedent and must be challenged.”

Champion initially tried to distance herself from how the article was framed, claiming that the opening paragraphs were edited and "stripped of nuance". The paper, however, said her team approved the piece and were "thrilled" with it.

In her resignation statement, Champion apologised for causing offence: “I apologise for the offence caused by the extremely poor choice of words in the Sun article on Friday. I am concerned that my continued position in the shadow cabinet would distract from the crucial issues around child protection which I have campaigned on my entire political career.”

“It is therefore with regret that I tender my resignation as shadow secretary of state for women and equalities.”

In a comment decrying The Sun's general Islamophobia-inciting coverage, the Labour leader Jeremy Corbyn warned against "attempts to brand communities or ethnic or religious groups, wittingly or unwittingly".

Anoosh Chakelian is senior writer at the New Statesman.