Osborne and Clarke at odds over VAT cut

Evidence of a split between the Shadow Chancellor and Shadow Business Secretary over the VAT cut.

George Osborne’s speech on curbing bankers’ bonuses today contained criticism of the VAT cut – a policy Ken Clarke once advocated.

Mr Osborne said:

“So what is left of this ‘massive fiscal stimulus’?

“A temporary VAT cut, which almost no retailer thinks has been effective, no other country considered copying, and which the Chief Economist of the IMF said with modest understatement ‘does not seem to me to be a good idea’.”

However, in an interview with The Times in November 2008 – on the eve of the announcement of the 2.5 per cent VAT cut – the Shadow Business Secretary had said:

“If it’s possible to afford a fiscal stimulus I would go for VAT because the only case for a fiscal stimulus is to stimulate spending and consumer demand, so the tax on spending is the one to go for. But it should be temporary.

“There’s no point in being ultra-orthodox. A lot of people are going to be hurt by a dreadful recession. If you think a fiscal stimulus is going to do any good then you could strive to see if you can afford it.”

Hat tip: Anthony Painter

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