The Conservatives can’t be trusted on VAT

By Toby Flux

The Conservatives have denied that they have a secret scheme to increase VAT to 20% if they win the next election. “There are absolutely no plans for such a rise and there’s never been any discussion about it,” claimed a Tory spokesperson. But we’ve heard similar denials before: remember the 1992 general election?

It was the election the Tories first produced the “tax bombshell” poster (since revived by David Cameron). It was also the election the Conservative manifesto pledged that they had:

“no need and no plans to extend VAT”.

The following year they announced a VAT increase on domestic gas and electricity bills to 8% for 1994 and 17.5% in 1995. David Cameron no doubt remembers it well – he was a “special adviser” to the Financial Secretary to the Treasury at the time. Who knows, he might have even been in the chamber when the then Leader of the Opposition, John Smith, described that budget:

“a shameful budget from a cynical government that has broken its election promises”.

In fact the history of VAT is one of Labour reducing it and the Tories increasing it. Not just recently to help reflate the economy, but since the Tories introduced it in 1973. While the subsequent Labour Government reduced it, Thatcher and Major increased VAT twice, more than doubling the rate.

During the 1979 election campaign, Lord Howe declared that he had:

“absolutely no intention of doubling VAT”.

They had in fact secretly agreed to increase it from 8 to 15 per cent.

The Tories also have a history of extending the scope of VAT including (but not exhaustively): hot takeaway food and drinks; building alterations; civil engineering works; newspaper advertisements; non-residential construction and property development; airport car parking; protective boots and helmets; fuel and power; water and sewerage services to business; travel and car hire insurance; and even incontinence pads.

The party who had “no need and no plans” to increase VAT in 1992, broke that promise, and now has no credibility when it denies plans for VAT increases to 20%. No wonder Stephen Timms MP is skeptical of today’s Tory denials, telling Labour Matters that Cameron needs to come clean on his VAT plans.

Labour has never increased the general rate of VAT, although that would change if the VAT rate returned to the 17.5% as planned on New Year’s Day next year. Labour has nothing to be ashamed of it does, though an extension would be welcomed by business.

Cameron’s Conservatives, however, have a massive credibility problem when even a denial in their manifesto can’t be believed. VAT is a Tory tax, and a 20% VAT rate is a Tory tax bombshell just waiting to explode.