George Osborne’s avoidable VAT rise

George Osborne repeatedly said that this was the "unavoidable Budget". But the rise in VAT was only necessary to pay for a series of tax cuts elsewhere.

In his Budget speech, George Osborne repeatedly said that this was the “unavoidable Budget”. Even within his self-imposed framework of £1 of net tax rises for every £4 of spending cuts – which flies in the face of all international comparisons – the VAT rise was only necessary to pay for a series of tax cuts elsewhere.

The regressive increase of VAT from 17.5 per cent to 20 per cent raises £13.5 billion by 2014-15. But cuts to income tax, national insurance, corporation tax, and council tax cost £12.4 billion. Once all the changes are taken into consideration, tax changes contribute only £8.2 billion to the fiscal consolidation.

By contrast, the reduction in total managed expenditure comes in at £31.9 billion with £20.9 billion coming from departments and £11.0 billion coming from changes to benefits such as the freeze on child benefit. Indeed, effective cuts to child benefit, the child tax credit, and child trust funds – which together cost £2.5 billion – could have been avoided if the Chancellor had not announced cuts to corporation tax.

George Osborne’s VAT rise was “avoidable”. The reason it has taken place is it pay for the Lib-Con’s ideological tax cuts, which fly in the face of fiscal responsibility.

UPDATE 17.44:

For somewhat different reasons, Conservative Home have come to the same conclusion about VAT. Tim Montgomerie’s piece also includes this line from David Cameron in an interview with Sky on April 1st: “Our plans don’t involve an increase in VAT”.

Labour List have a separate transcript of David Cameron saying the same thing after the election in mid-May. Next Left call this Conservative move, “the legendary Geoffrey Howe dodge on VAT”.

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33 Responses to “George Osborne’s avoidable VAT rise”

  1. House Of Twits

    RT @leftfootfwd George Osborne's avoidable VAT rise http://bit.ly/dbDwK9

  2. Martin Binfield

    RT @leftfootfwd: George Osborne's avoidable VAT rise http://bit.ly/dbDwK9

  3. Bangor Uni Labour

    RT @leftfootfwd: George Osborne's avoidable VAT rise http://bit.ly/dbDwK9

  4. Bangor Uni Labour

    @leftfootfwd: George Osborne's avoidable VAT rise http://bit.ly/dbDwK9 http://fb.me/ttAPMsxR

  5. Lamlamlamlamlamyaaaa

    RT @leftfootfwd: George Osborne's avoidable VAT rise http://bit.ly/dbDwK9

  6. Pranev Sharma

    VAT hike hitting poor = £13.5bn. Other tax cuts benefiting rich = £12.4bn. The rich pay for the poor. Same old Tories. http://bit.ly/90142v

  7. Pranev Sharma

    VAT rise hitting poor = £13.5bn. Tax cuts benefiting rich = £12.4 bn. The poor pay for the rich. Same old Tories. http://bit.ly/90142v

  8. Mr. Sensible

    Will, I honestly don’t know quite where to start.

    First of all, both you and Harriet Harman are entirely right. And I find it very interesting that, following these cuts, our growth prospects have been downgraded from 2.6% under Labour’s plans, as forecast by the OBR last week to 2.3% today.

    With regard to the increase in personal allowances, as Left Foot Forward has previously demonstrated, this will not help the very poorest, and any help it gives to lower-middle-income households will be canceled out by the increase in VAT.

    On Council Tax, it seems that the national government has not learnt from the mistakes of local governments across the country.

    And why has the government got rid of the young person’s guarantee? It is absolutely no use Mr Duncan Smith talking about getting people back to work and coming back with policies like this.

    With regard to public spending, under these proposals the government will cut non-protected departments by 25%. We’ll probably get more detail in the Spending Review, but we already know that frontline services are being cut.

    As Harman said, Same Old Tories.

    You know, Will, I’ve been saying for the last few weeks that George Osborne should be listed as regressive of the week, however, after today, I think he should now get the recognition he deserves. So can I put in an early bid for him?

  9. Paula Sharratt

    The political machine needs to work for everyone,

    When I think of ‘the greatest structural deficit in any western economy’ I don’t think of it in purely cash terms. I think in terms of the structural gap and distance between the rich and the poor which structurally diminishes life and life chances, opportunities to create economic development in the poorest parts of Great Britain.

    Structural deficit and cuts really means ensuring the class system is perpetuated but with notions that the poor are actually genetically inferior therefore there’s nothing to be done. Scary stuff really. Perhaps we need to rewrite the ‘Shameless Family’ with a little more empathy.

    What I really mean is that the poor are now institutionally prevented from achieving their potential because of the amount of bureaucracies surrounding their existence, which provide so many secure jobs for professional middle class people, from taking control of their lives. So many institutions have a vested interest in ‘helping themselves’ to a say rather than enabling the poor to speak and articulate their own very individual perspectives on the world. Treating groups of people as ‘things’ without the same needs brutalises them. Recognising that increasing social exclusion and extremes of wealth and poverty is an effect and indicator of bad faith at the heart of organisations funded by the public purse, attitudes and values of superiority which aren’t grounded in fact or humanity.

  10. Mr. Sensible

    BTW, 2 interesting stories on this on the BBC website:

    First, an analysis by Iain Watson:
    http://news.bbc.co.uk/1/hi/politics/10380221.stm

    And, given that Education spending is being cut,
    http://news.bbc.co.uk/1/hi/education/10378384.stm

    Why is the Department for Education looking to still press ahead with Free Schools? If there’s no money for other parts of education spending, there’s no money for that. Ms Blower is entirely right.

  11. Peter Campbell

    RT @leftfootfwd http://bit.ly/dbDwK9 <- Excellent analysis

  12. Hitchin England

    George Osborne's avoidable VAT rise http://bit.ly/dbDwK9 via @leftfootfwd

  13. John Martin

    This Budget is decisive and must be taken seriously. The Coalition may well succeed with it and it is not a winning strategy to say yahboo. Labour must be completly clear about an alternative strategy and be precise about what it would cut and when. Unfortunately it is still true that the electorate think Labour is to blame. And there is another imperative: it is the duty of Oppositions to oppose – relentlessly and boldly.

  14. George Eaton

    Why the VAT cut was entirely avoidable from the left (@wdjstraw) http://bit.ly/cTQP2v and the right (@TimMontgomerie) http://bit.ly/d3Y5lX

  15. Billy Blofeld

    Never trust politicians. Lisbon Treaty – now VAT. Treacherous gits………..

  16. Jacquie Martin

    I remember both these parties clearly saying they had no plans to increase VAT. As the deficit was lower than anticipated – then why did they do it?

    So they would be able to find some way to reward their mates with other tax breaks.

    CGT could have gone higher – 50% income tax highest rate. Still going to use CGT for income tax avoidance then.

    CT – why oh, why is this going to be reduced to 24% over 4 years?. It will be the lowest headline rate ever. Lowest in the G7. Fifth lowest in G20.

    The truth = tax on profits of big companies bad. Tax on assets of wealthy bad. Tax on poor – who spend more of their incomes proportionately on goods and services – good.

    Unavoidable, no plans – my fanny!

  17. Jill

    RT @switchday: VAT rise hitting poor = £13.5bn. Tax cuts benefiting rich = £12.4 bn. The poor pay for the rich. Same old Tories. http://bit.ly/90142v

  18. Richard Wood

    RT @switchday: VAT rise hitting poor = £13.5bn. Tax cuts benefiting rich = £12.4 bn. The poor pay for the rich. Same old Tories. http://bit.ly/90142v

  19. Tom Miller

    Why the Tories DIDN'T need to raise VAT – but chose to anyway – http://tinyurl.com/3999f6y

  20. Labour Matters

    But we already know that the Tories were planning a VAT rise before the election. They’ve actually put it up by 0.5% more than they were planning. Here’s how we covered the Mirror story about the VAT hike which was leaked in a Tory memo at the end of April: http://www.labourmatters.com/Editor/vat-deception-revealed-by-top-tory-mirror-memo/

  21. Annie B

    RT @switchday: VAT rise hitting poor = £13.5bn. Tax cuts benefiting rich = £12.4 bn. The poor pay for the rich. Same old Tories. http://bit.ly/90142v

  22. Neil Scott

    RT @switchday: VAT rise hitting poor = £13.5bn. Tax cuts benefiting rich = £12.4 bn. The poor pay for the rich. Same old Tories. http://bit.ly/90142v

  23. mike

    Vince Cable

    “From national treasure to Treasury Puddle”

  24. mike

    Tories VAT Tax Bomb
    ad launched by the Liberals

  25. Daily Cuts Briefing – Wednesday 23rd June « A Thousand Cuts

    […] Will Straw on the ‘unavoidable’ VAT rise […]

  26. "George Osborne’s avoidable VAT rise" and related posts | www.TheUntoldStories.com

    […] the original here: "George Osborne’s avoidable VAT rise" and related posts   No […]

  27. Danny

    RT @leftfootfwd: George Osborne's avoidable VAT rise http://bit.ly/90142v

  28. jo

    RT @leftfootfwd: George Osborne's avoidable VAT rise http://bit.ly/90142v

  29. MICHAEL SPARLING

    RT @Juderobinson: The avoidable VAT rise http://bit.ly/90142v

  30. More woe for Clegg as Ed Miliband slams Coalition’s 100-day record | Left Foot Forward

    […] ten are: the deep cuts which risk a double-dip recession; the £389 per family VAT tax bombshell; the cuts to business support, from Sheffield Forgemasters to the abolition of the Regional […]

  31. Tackling the scourge of child poverty in Wales | Left Foot Forward

    […] situation faster than we can pull them out. With the scrapping of Child Trust Funds, the scandalous hike in VAT, and a raft of potentially dangerous changes to welfare on the way, it seems we have a government […]

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