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11 December 2014

Miliband all but rules out a VAT rise under Labour

Labour leader tells the New Statesman: "It hasn't happened in the past, I don't think it's going to happen in the future."

By George Eaton

Ed Miliband used his speech on the economy this morning to warn of the dangers of another VAT rise if the Tories win the election.  He said: “The Tories cannot say how they would fund their tax cuts skewed to help the wealthiest. This is not responsible and not right. And the British people should be in no doubt what the Tory promise means: they will pay the price for tax cuts one way or another. They will pay the price in higher VAT or even bigger cuts to public services.”

Miliband’s strategic aim is to create a sense of risk around another Tory government to match that the Conservatives have created around Labour. George Osborne has insisted that he can eliminate the remainder of the deficit through spending cuts alone but rather than ruling out a rise in VAT, he has merely said that “we don’t have any plans to”: the exact formulation he used before he increased the tax from 17.5 per cent to 20 per cent in his first Budget. 

During the Q&A that followed the speech, I asked Miliband whether he was prepared to rule out increasing VAT (a regressive tax) if Labour won the election. He told me:

We’ll set out our tax plans at the election, George. But I think I would steer you well away from any Labour government raising VAT. It hasn’t happened in the past, I don’t think it’s going to happen in the future.

That goes significantly further than Osborne’s “no plans” by suggesting that such an act would be alien to the party’s values. It also leaves open the possibility that Miliband will go further by the time of the election and unambiguously rule out raising VAT, something that Ed Balls and others urged Gordon Brown to do in 2010 but that Alistair Darling vetoed. 

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As Anoosh has reported, there was one new announcement in the speech: the third interim report of Labour’s zero-based spending review has identified £500m of efficiency savings in the local government budget.