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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Paul Nuttall is like his party: sad, desperate and finished

The party hope if they can survive until March 2019, they will grow strong off disillusionment with Brexit. They may not make it until then. 

It’s a measure of how far Ukip have fallen that while Theresa May faced a grilling over her social care U-Turn and Jeremy Corbyn was called to account over his past, the opening sections of Andrew Neill’s interview with Paul Nuttall was about the question of whether or not his party has a future.

The blunt truth is that Ukip faces a battering in this election. They will be blown away in the seats they have put up a candidate in and have pre-emptively retreated from numerous contests across the country.

A party whose leader in Wales once said that climate change was “ridiculous” is now the victim of climate change itself. With Britain heading out of the European Union and Theresa May in Downing Street, it’s difficult to work out what the pressing question in public life to which Ukip is the answer.

Their quest for relevance isn’t helped by Paul Nuttall, who at times tonight cast an unwittingly comic figure. Pressing his case for Ukip’s burka ban, he said earnestly: “For [CCTV] to work, you have to see people’s faces.” It was if he had intended to pick up Nigel Farage’s old dogwhistle and instead put a kazoo to his lips.

Remarks that are, written down, offensive, just carried a stench of desperation. Nuttall’s policy prescriptions – a noun, a verb, and the most rancid comment underneath a Mail article – came across as a cry for attention. Small wonder that senior figures in Ukip expect Nuttall to face a move on his position, though they also expect that he will see off any attempt to remove him from his crown.

But despite his poor performance, Ukip might not be dead yet. There was a gleam of strategy amid the froth from Nuttall in the party’s pledge to oppose any continuing payment to Brussels as part of the Brexit deal, something that May and Corbyn have yet to rule out.

If May does manage to make it back to Downing Street on 8 June, the gap between campaign rhetoric – we’ll have the best Brexit, France will pay for it – and government policy – we’ll pay a one-off bill and continuing contributions if need be – will be fertile territory for Ukip, if they can survive as a going concern politically and financially, until March 2019.

On tonight’s performance, they’ll need a better centre-forward than Paul Nuttall if they are to make it that far. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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