Jeremy Browne: VAT cut has helped the richest the most

The Lib Dem press release headline is stark: Wasteful VAT cut only benefiting the rich. (It’s also, whisper it gently, not 100% accurate: for ‘only’ read ‘mostly (ish)’).

Here’s what Lib Dem shadow chief financial secretary Jeremy Browne has to say about the party’s research showing that the VAT ‘savings work out at an average of over £9 a week for the richest households, while poorer households are saving less than £3, despite recent claims from Gordon Brown that families would save at least £5 a week’:

The Government’s defence of its wasteful VAT cut continues to unravel. Its benefits have been overstated and most of the money is not helping the poorer households that are struggling in the recession.

“This ineffectual VAT cut is costing £1bn a month. Ministers should scrap it immediately and spend the money on transport and environmental projects which would boost the economy, create new jobs and leave a lasting green legacy for Britain.”

The picture is in fact more complex than the Lib Dem press release suggests, as Andrew Sparrow notes in The Guardian:

… it depends how you slice the figures. In response to parliamentary questions, the Treasury minister Stephen Timms released figures showing how much different groups save as a percentage of their total income from the cut in VAT to 15%. Viewed from this angle, the VAT cut looks progressive. The poorest 10% of households save the equivalent of 1.6% of annual income, while the richest 10% save 0.5% of annual income.

In that sense, then, the VAT cut can be defended as ‘progressive’, as the poorest benefit proportionately more than the richest, but not in absolute terms. The same would, I guess, also be true of the Lib Dem pledge to cut basic rate income tax by 4p – though that would of course be part-funded by wealth taxes targeting the richest.

Strange to say, though, I don’t remember Gordon Brown proudly proclaiming the Labour Government’s wish to cut £1.2 billion from the taxes of the richest 10% in the country when acclaiming the VAT cut. What he did claim, though, was that the VAT cut would ensure “people have at least £20 more in their pockets every month”. Which simply isn’t true for the poorest 60% of people (ie, the majority of households). Yes, that’s right, folks, after last year’s 10p tax fiasco, it’s yet another Gordon Brown tax-con!

Read more by or more about , , , or .
This entry was posted in News.

One Comment

  • Terry Gilbert 12th Apr '09 - 9:14am

    I suspect that ‘guessing’ that the Lib Dem proposals to cut Income Tax by 4% are ‘progressive’ is not enough, Steven.
    Income tax is the most progressive tax we have in this country, and our current leadership want to slash it to less than half what it was 30 years ago. In this respect they are more Thatcherite than TBW herself, and I shall continue to oppose them on it.
    Jeremy Browne merely highlights that our own policy is even more regressive.

Post a Comment

Lib Dem Voice welcomes comments from everyone but we ask you to be polite, to be on topic and to be who you say you are. You can read our comments policy in full here. Please respect it and all readers of the site.

If you are a member of the party, you can have the Lib Dem Logo appear next to your comments to show this. You must be registered for our forum and can then login on this public site with the same username and password.

To have your photo next to your comment please signup your email address with Gravatar.

Your email is never published. Required fields are marked *

Please complete the name of this site, Liberal Democrat ...?


Recent Comments

  • User Avatarrichard underhill. 9th Aug - 5:30pm
    Paul Barker 9th Aug '20 - 1:52pm Perhaps it is too soon, but Labour are under new management. Labour need to do a lot to...
  • User Avatarrichard underhill 9th Aug - 5:17pm
    * Daisy Cooper came second in the contest to become Party President in 2014. She is on the party’s Diversity Engagement Group. She is NOW...
  • User Avatarrichard underhill 9th Aug - 5:15pm
    * Daisy Cooper came second in the contest to become Party President in 2014. She is on the party’s Diversity Engagement Group. She is the...
  • User AvatarBarry Lofty 9th Aug - 5:05pm
    Although a lot has been made about the tuition fees controversy, and it was not the Lib Dems finest moment, it pales into insignificance with...
  • User AvatarFormer Dem 9th Aug - 4:49pm
    I will never, ever vote Lib Dem again whilst they are led by someone who voted for the tuition fees rise, breaking their personal pledge.
  • User AvatarMartin 9th Aug - 4:34pm
    Daisy Cooper: Your assessment is obviously well informed, may well be correct and certainly is or should be influential, however your plea to be realistic...