Political pledges on value added tax tend to have a short shelf life. The strong Tory denials on Sunday of a reported “plan” to raise VAT to 20 per cent are no doubt true. But, with the public finances in such a dire state, the debate seems eerily reminiscent of a legendary Geoffrey Howe dodge.
In the run up to the 1979 election, Labour were obsessed with the Tories planning to double VAT. Howe and Thatcher dismissed it as a smear. Howe was pretty explicit: “We have absolutely no intention of doubling VAT.” The Daily Mail was so convinced, it included the “double VAT” charge in a splash on “Labour’s dirty dozen lies”, just days before the campaign concluded.
The trouble was that the Tories had already agreed a “massive” hike in VAT a good year before winning the election. Sure, they didn’t want to double the rate. The secret plan, hatched at Howe’s house on the Fentiman Road, was completely different: to raise VAT from 8 to 15 per cent. Howe announced it in his first Budget. This story by my colleague Nick Timmins (written when he was at the Independent) runs through the whole saga.
Howe was unapologetic in his memoirs, describing the row as “part of the small change of election campaigning”.
“We had no difficulty denying it. For there was no prospect, on even the most gloomy of expectations, of our having to go beyond a rate of 15 per cent.
Some critics afterwards thought it pedantically misleading to rest our case on the fact that twice 8 per cent (the then basic rate) was 16 and not 15 per cent.
They also overlooked the fact that some goods (about 6 per cent of the basket) were already taxed at 12.5 per cent: the weighted average impact of the existing dual rate was 8.5 per cent. So our denial was more than technically correct.”
Jim Pickard
Kiran Stacey
