Alistair Darling wanted to raise VAT

Throws a bit of a spanner in the works of the Labour rhetoric about how awful anyone who contemplates raising VAT is:

Amid reported wrangling between No 10 and the Treasury, Lord Mandelson suggested in his memoir that Mr Brown rejected a proposal from the chancellor to raise VAT while Mr Darling quashed calls for any future VAT rises to be ruled out. (BBC)

Mandelson writes that Brown and Darling rowed over economic strategy. He “vetoed point-blank” a proposal from Darling to raise VAT up to 18% or 19%. The then chancellor then blocked a proposal from Brown to rule out VAT rises under Labour in the course of that parliament. (Guardian)

Perhaps we’ll see a sudden point of principle discovered by some in Labour which makes VAT at 19% acceptable but VAT at 20% beyond the pale…!

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21 Comments

  • Andrew Duffield 14th Jul '10 - 9:00am

    So that’s alright then.

    When is Clegg going to launch a website on more effective, effiicient and equitable ways to raise taxes?

  • 1) Alistair Darling wanted to raise VAT. Gordon Brown vetoed it. Alistair Darling didn’t want to eliminate it as an option over the next parliment. It doesn’t mean they would have done so.

    2) The Lib Dems launched a high profile anti-VAT campaign to win votes from the Tories. They then went ahead and rose VAT, making a big thing about how they carefully didn’t actually *say* they wouldn’t, even if that was the impression we were supposed to get.

    There’s a huge difference. Anyway, I still sympathise more with Alistair Darling than any Lib Dem because his wish to raise VAT wasn’t to pay for cutting progressive taxes like the income tax, it was as a means to protect the services that the most vulnerable rely on.

  • I wouldn’t have a problem with VAT if they extended the exempt list substantially to include everything you might need to live a free life.

  • So come on Mike – will Alistair say where the 44bn of cuts and 20% reduction in the state would come from? I’m all ears.

  • Mike, as the debate goes round and round, a Lib Dem majority government would not have raised VAT.

    What is staggering is that Labour have sought political mileage out of a coalition which inevitably involves policy compromise on VAT despite being prepared to do it themselves. Maybe Labour should have formed a coalition with the Tories?

    The Lib Dems have never compromised on principle in this coalition but we have – obviously – compromised on policy (because that is what a coalition is).

    The question is to what extent this compromise is significant, massively damaging, or different to what anyone else would have done, and on VAT it is looking increasingly likely that Labour have lost their advantage.

    (What is even more staggering is that yesterday it seems Labour MPs were calling for capital gains tax to be cut.)

  • “the Labour rhetoric about how awful anyone who contemplates raising VAT is”

    I think you may have failed to listen very hard to Labour rhetoric, and also got a little confused about the distinction between “raising VAT” and “contemplating raising VAT”. One is considerably more awful than the other. If you remember (and this is why the Mandelson story is old old old news) the fact that the Treasury considered raising VAT was public knowledge in 2008, to the extent that the Tories produced a poster warning about Labour’s 20% VAT bombshell. However, it can’t be emphasised strongly enough that *Labour didn’t actually do it*. (Also, someone else did. Who was that, again?)

  • Stuart Mitchell 14th Jul '10 - 11:06am

    “Throws a bit of a spanner in the works of the Labour rhetoric about how awful anyone who contemplates raising VAT is”

    Er, no it doesn’t. Like most Labour supporters I think Darling was awful for contemplating such a thing and I am pleased that Brown overruled him.

    These daily Labour-bashing pieces are getting increasingly silly. Just to recap the three parties’ positions on VAT before and after the election :-

    1) Gordon Brown explicitly ruled out an increase in VAT – again overruling Darling. Labour are still opposed to the VAT increase.

    2) The Tories simply said nothing about VAT before the election, then gleefully raised it afterwards.

    3) The Lib Dems campaigned fiercely against the Tory VAT increase before the election – but are now supporting it in government (despite the fact that the deficit is actually smaller than was thought). Vince Cable admitted to the BBC that the Lib Dems only campaigned against it in order to score political points during the election.

    Seems to me that Labour were the only party being honest with the public about VAT before the election.

  • Paul McKeown 14th Jul '10 - 11:10am

    Didn’t the Treasury publish financial plans during the last Labour government, whilst senior Ministers were busy telling Parliament that there were no such plans. Has everyone such poor memories, or does the fact that the offending documents were removed post haste from the Treasury website mean that it didn’t really happen, and Labour never had such plans, after all?

  • simon mcgrath 14th Jul '10 - 11:25am

    The depressing thing is how many people here are retelling the same old labour lies about the VAT increase hitting the poorest first.
    When people are poor they spend most of their money on necessities, virtually all of which are not subject to VAT.

    And the budget specifically ensuresa that the same poor people will get higher child tax credit and lower income tax.

  • Stuart Mitchell 14th Jul '10 - 12:19pm

    Simon: “When people are poor they spend most of their money on necessities, virtually all of which are not subject to VAT.”

    Really? Are adult clothes and domestic fuel not “necessities”? Many other items such as sanitary products and mobility aids would also be considered “necessities” by at least some people.

  • Stuart Mitchell 14th Jul '10 - 1:35pm

    Paul: Can you not appreciate the difference between evaluating various different proposals, and actually having a “plan”? Labour considered *and rejected* a VAT rise. Note the word “rejected” in that sentence. Are you seriously criticising Labour for considering all the fiscal options, before choosing the one they felt was the best? Sounds to me like an eminently sensible way to proceed.

  • Paul McKeown 14th Jul '10 - 1:43pm

    @Stuart

    No – they lied.

  • Stuart: “Are adult clothes and domestic fuel not “necessities”? Many other items such as sanitary products and mobility aids would also be considered “necessities” by at least some people.”

    Adult clothing is a highly competitive market and greater than 2.5% savings can easily be achieved by shopping around, buying last seasons’ fashions, buying a brand with less cachet or even buying second-hand.

    Domestic fuel is taxed at the “reduced rate” of 5% and this hasn’t been increased with the increase of the “standard rate” from 17.5% to 20%. Similarly, mobility aids are also taxed at the 5% rate, and equipment for disabled people is zero rated. ( http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htm ). By all means, campaign for zero rating of these items (and I will support such a goal), but it’s disingenuous to claim that the rise made matters any worse for purchasers of these classes of goods.

  • Stuart Mitchell 14th Jul '10 - 1:58pm

    Paul: What, specifically, did they lie about, and do you have the quotes?

  • Stuart Mitchell 14th Jul '10 - 2:05pm

    Alex: “it’s disingenuous to claim that the rise made matters any worse for purchasers of these classes of goods.”

    I made no such claim; I was only correcting Simon’s bizarre assertion that “virtually all” essential items are exempt from VAT.

    Though it is certainly true that the VAT rise *does* make matters worse for purchasers of some essential goods – clothes being a good example.

  • @stuart – i really dont see any point in replying since alex has done such a good job of demolishing what you have said. Labour trolls like you are desperate to find some thing wrong with the coalition.
    why not admit it – cuts have to be made and taxes raised and the lib dems are doing a great job of protecting the poorest.

  • Stuart Mitchell 15th Jul '10 - 9:38pm

    SMcG: I wonder, ten weeks or so ago when Nick Clegg was going on about how awful a VAT rise would be, were you saying HE was talking rubbish?

  • He wasn’t saying that an increase in VAT would affect poorest people as far as I know and of course he hadnt put into place other measures like the increase in child tax credit specificxally to help poor people

  • Stuart Mitchell 16th Jul '10 - 10:33am

    SMcG: I take it you missed the IFS’ post-budget analysis which showed that the bulk of the progressive tax changes are in fact left in from Labour’s last budget, and that the coalition’s new measures, in isolation, are thumpingly *regressive*. Any thoughts on that?

  • @staurt – so labour hit the better offf already. sounds like a good reason not to hit them again.

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