Simon Hughes fires a warning shot over VAT

Lib Dem deputy leader warns Osborne not to raise “the most regressive tax”.

Simon Hughes, fresh from his success in the Lib Dems' deputy leadership contest, has just made a highly significant intervention on tax. In an interview with the Daily Politics, the left-leaning MP signalled his unambiguous opposition to any rise in VAT, which he accurately described as "the most regressive tax".

He said:

I hope that the Chancellor's hearing the voices that say VAT is not the right tax to change in the Budget next week.

There is no good reason why Hughes should not get his way. Ignore George Osborne's flat-out lie that "things are worse than we thought"; the latest figures confirm that he will be able to eliminate the bulk of the structural deficit without any unplanned tax rises.

Any tax increases (and spending cuts) above and beyond those planned by Alistair Darling are purely ideological. Yet Conservative voices continue to suggest that a 1 per cent rise in VAT, likely to be announced in Tuesday's emergency Budget, is both desirable and necessary.

Either way, Hughes, with the support of his party's grass roots, has laid down a clear marker. Should Osborne choose to ignore it, he will risk dividing the Lib Dems and, perhaps, the coalition, too.

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George Eaton is political editor of the New Statesman.

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How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

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