VAT vow 'may have changed election'
Updated on 13 June 2010
Labour could have "changed the course of the election" if it had explicitly ruled out a rise in VAT, leadership contender Ed Balls said.
And he said the party should now give up its "cautious silence" on the issue and prepare to fight "tooth and nail" against an expected hike in the tax to 20% in Chancellor George Osborne's June 22 Budget.
Mr Balls' comments, in an article for a national newspaper, may be seen as a criticism of shadow chancellor Alistair Darling, who repeatedly declined to rule out a VAT rise during the election campaign.
And they may open up a fresh battle-line with leadership rival David Miliband, who has been backed by Darling. A source close to Balls said that he was taking a lead in the contest to succeed Gordon Brown, just he has previously done by calling for tighter immigration controls and backing a graduate tax.
And he said the shadow education secretary was taking the fight to the Conservatives as the Office for Budget Responsibility prepares to unveil the growth and borrowing figures that will provide the statistical justification for tax rises and spending cuts in next week's Budget. In his article, Mr Balls said he privately urged Mr Brown to make a manifesto commitment not to raise VAT from its current 17.5% rate, but "others disagreed".
The decision not to adopt the commitment "made no sense to me", as it was "plain wrong" in principle and denied Labour a potentially game-changing line of attack against David Cameron's Conservatives, he said. "I believed that if we made a principled case for ruling out a VAT rise, as well as against premature cuts in public spending, it would change the course of the election," said Mr Balls.
"On the doorstep, Labour candidates could have made the choice for voters come alive in a way that we often struggled to do. David Cameron's refusal to answer straight questions in the leaders' debates would have been more openly exposed." And he added: "I believe increasing VAT is plain wrong and during the election we should have said that loud and clear."
Mr Balls predicted that the Tory-Liberal Democrat coalition will use an increase in the sales tax - which is paid by everyone, including the unemployed and pensioners - in order to pay for a pre-election income tax cut which benefits only those with earnings. And he warned that raising the tax would be "economic madness" as it would depress spending, fuel inflation and hit the struggling retail sector.
"The Tory plan is clear: use inflated fears of a debt and monetary crisis to justify massive public spending cuts and an increase in VAT now; blame it all on Labour's management of the economy; and use the resulting war-chest to cut income tax before the next election," wrote Mr Balls. "As the only serious opposition left in Britain, I believe Labour must fight tooth and nail on behalf of the whole country, not just after the forthcoming Budget - but now, when it can be stopped."
Mr Balls said: "It made no sense to me that Labour's manifesto should unequivocally rule out the removal of the VAT zero rates, but leave open the similarly-regressive raising of the standard rate. To my mind, to avoid taking a principled stance - either for an increase or against it - and to remain silent on the issue would repeat the mistake we made at the election - even if the money markets do applaud George Osborne for raising VAT."
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