How the Tories and the Lib Dems broke their VAT promises

David Cameron insisted that the Tories had “absolutely no plans” to raise VAT.

As VAT rises to a record high of 20 per cent, I thought it might be worth looking back at the promises the Lib Dems and the Tories made on the subject during the election.

The Lib Dems famously made their opposition to a VAT increase a centrepiece of their general election campaign, warning of a "Tory VAT bombshell". They were right about that but, presumably, never planned to help drop it.

At that time, Nick Clegg said: "We see absolutely no reason to raise VAT because we have done our homework, we have identified where money can be generated and where money can be saved."

VAT

The Conservatives

The Tories' VAT promises have received less scrutiny but, if anything, their disingenuity is worse. Throughout the election campaign, David Cameron repeatedly stated that his party had "absolutely no plans to raise VAT".

He said:

We have absolutely no plans to raise VAT. Our first Budget is all about recognising we need to get spending under control rather than putting up tax.

This falls some way short of a guarantee not to raise VAT, but it also gives no hint of a tax rise that Cameron was planning all along. The grim conclusion is that the Tories hid this tax increase from the voters for electoral purposes.

More strikingly, in May 2009, the Conservative leader suggested that he would never raise a tax that "hits the poorest the hardest". As he said:

You could try, as you say, to put it on VAT, sales tax, but again if you look at the effect of sales tax, it's very regressive, it hits the poorest the hardest. It does, I absolutely promise you. Any sales tax, anything that goes on purchases that you make in shops tends to . . . if you look at it, where VAT goes now it doesn't go on food, obviously, but it goes very, very widely and VAT is a more regressive tax than income tax or council tax.

Both parties have since attempted to justify the VAT rise by arguing that "things were even worse than we thought". But this claim does not bear scrutiny. The Lib Dems and the Tories were fully aware of the size of the Budget deficit and, just ten days after the coalition was formed, the deficit was revised downwards from £163.4bn to £156bn, having previously stood at £178bn. The VAT rise was a political choice, not an economic necessity.

Moreover, £12.4bn of the £13.5bn raised by the increase is being used to pay for tax cuts elsewhere, including to National Insurance and to corporation tax. In the Guardian, Philippe Legrain sets out a range of alternatives to raising VAT, including new taxes on financial transactions, carbon and land.

We are still waiting for a convincing justification for a tax rise that is not only unfair, but also economically reckless.

George Eaton is political editor of the New Statesman.

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I'm a Remain voter who feels optimistic about Brexit - here's why

Take back control is more than just a slogan. 

Most politics geeks have found themselves deliciously sucked into a soap opera over the last few days. It’s fast-paced, personality-based and ripe for speculation. But underneath it all, the deeper, harder questions remain – what does Brexit look like, and how can we make it work?

When news of Leave’s victory broke in the early hours of Friday morning (is it possible that was just a week ago?) I felt like the only Remain voter who had some kind of optimism. Fellow Remainers still reeling from the result berate me for it, but I continue to find two reasons for hope.

First, leaving gives us a chance to build a different type of economy. I don’t wish to belittle the recent economic fallout, but with the right leadership and negotiations, we could use this moment to push for an increase in trade with the Commonwealth and beyond. A fall in the pound will disappoint many, but it could help with a much needed rebalancing of our economy, moving from one predominantly based on financial services in London to manufacturing across the regions. 

Second – and perhaps more importantly – leaving is a chance to rebuild our politics. For too long, millions of people in this country have felt ignored or exploited by those who call themselves democratic leaders. In protest, they have left mainstream parties to join UKIP or the hordes of non-voters. In winning this referendum, they have finally been listened to. Perhaps the pressure cooker of discontent can finally be taken off the boil. Perhaps parties can use this result as a chance to rebuild trust and shake up some of our other institutions that are badly in need of reform. 

This point was really brought home to me by a student in the school where I teach. The morning of the referendum she told me that she didn’t think we’d leave the EU, even if the people voted for it. Her friends agreed, saying it was “weird you have to vote in pencil”. They were scared the people’s voice could so easily be rubbed out. When I saw her the next day, a small part of me was relieved that these students had seen that people can genuinely trump the establishment. 

If you’re not convinced, just imagine the backlash if Remain had won by a point or two. We almost certainly would then have voted in an extremely right-wing government, much the same way that the SNP saw a boost after they lost the independence referendum last year. 

Of course, a positive path for Brexit is far from guaranteed. Any leader that goes back on the vote, or tries to fudge it by saying that open borders are a price worth paying, is going to do worse than plummet in the polls - they are going to undermine our entire democracy. And a whole generation’s trust in politicians is already dangerously low.

But this doesn’t have to be a moment for the right. Good leaders understand that Leave’s “take back control” message was about a genuine concern with our borders. Great leaders will acknowledge that it also reflected a deeper concern about the need for agency. They understand the vote was a rejection of a neoliberal approach to the economy that fails to make space for well-paid work, family and community.

The public voted for decreased pressure on public services and a Britain that would negotiate as hard in India as it would in Germany for trade deals. They voted to end a perceived overcentralisation of power by elites, and create a more democratic Britain that gives more dignity to its people. I might not have believed that leaving the EU was the best way to achieve these things, but I’m on the left because I believe we are best placed to make these desires real.  

The vote to Leave or Remain was a binary decision. But Brexit is not. What type of path we take now depends entirely on the direction we choose, and the perseverance we show along the way.

Rowenna Davis is Labour PPC for Southampton Itchen and a councillor for Peckham