Labour should get behind Balls's VAT cut

The party must not miss a chance to redefine the economic debate.

Ed Balls's bold call for a temporary cut in VAT has not received the support that it deserves. On The Daily Politics earlier today, Alistair Darling refused to endorse the plan and Labour has failed to rebut George Osborne's claim that a temporary reduction to 17.5 per cent would cost £52bn.

The FT, which claims that Balls failed to brief the shadow cabinet on his plan, reports one member as saying: "The problem is that it is playing to our weaknesses and creates the impression that we can't face up to tough decisions."

It's a pity that so many others share this view. Balls's call for a VAT cut was a chance for Labour to redefine the parameters of the economic debate and to regain the initiative from the Tories. As I blogged last week, contrary to Osborne's claim that the measure is "unfunded", there is much evidence that a cut in VAT would pay for itself. Mark Littlewood, the director of the Institute of Economic Affairs and no friend of Balls, agrees with this. He tweeted earlier today: "in the odd position of agreeing with Ed Balls rather than the PM on VAT. 20% is quite possibly on "wrong side" of the Laffer curve." It's exactly these sorts of arguments that ministers need to be making. A temporary VAT cut would boost consumer confidence, lower inflation (thus reducing the risk of a premature rate rise), protect retail jobs and increase real wages, meaning it would likely be self-funding.

History teaches us that tax cuts can change the political weather. It was George Osborne's populist pledge to raise the inheritance tax threshold to £1m that persuaded Gordon Brown not to call an early election. Labour must not miss an opportunity to prove that it, not the Tories, is on the side of consumers.

George Eaton is political editor of the New Statesman.

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Lord Sainsbury pulls funding from Progress and other political causes

The longstanding Labour donor will no longer fund party political causes. 

Centrist Labour MPs face a funding gap for their ideas after the longstanding Labour donor Lord Sainsbury announced he will stop financing party political causes.

Sainsbury, who served as a New Labour minister and also donated to the Liberal Democrats, is instead concentrating on charitable causes. 

Lord Sainsbury funded the centrist organisation Progress, dubbed the “original Blairite pressure group”, which was founded in mid Nineties and provided the intellectual underpinnings of New Labour.

The former supermarket boss is understood to still fund Policy Network, an international thinktank headed by New Labour veteran Peter Mandelson.

He has also funded the Remain campaign group Britain Stronger in Europe. The latter reinvented itself as Open Britain after the Leave vote, and has campaigned for a softer Brexit. Its supporters include former Lib Dem leader Nick Clegg and Labour's Chuka Umunna, and it now relies on grassroots funding.

Sainsbury said he wished to “hand the baton on to a new generation of donors” who supported progressive politics. 

Progress director Richard Angell said: “Progress is extremely grateful to Lord Sainsbury for the funding he has provided for over two decades. We always knew it would not last forever.”

The organisation has raised a third of its funding target from other donors, but is now appealing for financial support from Labour supporters. Its aims include “stopping a hard-left take over” of the Labour party and “renewing the ideas of the centre-left”. 

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. 

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