VAT

Jim Pickard

Alan Johnson heavily criticised the New Year rise in VAT from 17.5 per cent to 20 per cent this morning, warning it would cost jobs and could jeopardise the economic recovery.

Is this responsible opposition? A Tory source points out that Labour would have almost certainly have done the same thing – or at least considered it very strongly. 

Jim Pickard

It is hard to know sometimes whether Simon Hughes is playing a fiendishly complex strategic game in order to leverage anti-Tory forces within his own Liberal Democrat party and thus enhance his own reputation. Or whether he just can’t resist saying controversial things.

So it was with the VAT rise. Tuition fees. And with council housing. And now Mr Hughes (deputy leader the Lib Dems) is insisting that there will be no electoral pact between his party and the Tories come the next general election. (This is in contrast to Tories such as backbencher Mark Field, who has proposed a non-aggression agreement). 

Vince Cable valiantly continues to argue that the £1,000 increase in the income tax threshold is part of the Lib Dem “progressive” strand of this week’s Budget – evidence that George Osborne listened closely to the Lib Dems’ determination to protect the poor when framing his austerity package.

Before he pushes the case too far, Cable would do well to have a quiet word with his departmental (Tory) colleague David Willetts.

Politicians (and the media) have short memories. Increases in the income tax threshold used to be a favourite policy of the Conservative right: people would keep more of their own money and would be less dependent on state benefits, the argument ran. And, the poor would benefit. 

The unions, Ed Balls, the Taxpayer’s Alliance, Tim Montgomerie and Guido have all come out against a rise in VAT.

The possible flaw in their argument is taking the tax rise in isolation. They’re assuming every option for spending restraint is an alternative. The brutal fact is we’re probably going to implement all the cuts they can think of, dream up a few more, and raise taxes. That’s how big the hole is.  

Cameron has made some striking pledges on how he will cut the deficit. The trouble is that most of them are at odds with his promise to protect the vulnerable.

As this excellent Social Market Foundation report contends, it is hard to see how any of his pledges on ring-fencing middle class benefits, limiting tax rises and increasing health spending will survive, at least if Cameron really isn’t going to balance the books on the backs of the poor.