Balls: “Osborne’s got two weeks to come up with a plan B”

Ed Balls has warned that George Osborne may be "making the same mistakes" as Thatcher "all over again", and that he's got just two weeks "to come up with a plan B for the Budget".

Ed Balls has warned that George Osborne may be “making the same mistakes” as Thatcher “all over again”, and that he’s got just two weeks “to come up with a plan B for the Budget… don’t hold your breath”. In his latest Tribune column, the shadow chancellor also calls on Osborne “to take immediate action on the cost of fuel” – particularly VAT on fuel.

Balls writes:

“The two global recessions in the 1970s were both linked to the supply and cost of oil from that region which the whole world is dependent on. The 1973-75 recession followed the collapse of the OPEC deal which saw a big rise in oil prices. And in 1979 it was the revolution in Iran and the deposing of the Shah which forced up world oil prices, with petrol hitting £1 a gallon.

“Both times global downturns hit Britain hard. But in 1979 things here were made much worse by the austerity budgets of the incoming Thatcher government – near-doubling VAT, cutting spending and forcing up mortgage rates. Sound familiar? I fear George Osborne may be making the same mistakes all over again.

“He has chosen this very moment of rising oil prices and world commodity prices to hike up VAT. It’s the wrong tax at the wrong time – taking £13 billion out of the economy just when growth has stalled and unemployment is rising.

“The result is that families on low and middle incomes face a real cost of living crisis over the coming years – as Ed Miliband set out earlier this week. Families are being badly squeezed by this Conservative-led government’s hit on living standards through cuts to public services, cuts to tax credits and higher taxes like the VAT rise, with the threat of higher mortgage rates on the horizon.”

Balls also sets out four reasons why the government should think again on the VAT rise on fuel, concluding:

“The Chancellor needs to come up with a plan to get our stalled economy moving again and get more people into work paying taxes and making a contribution. That’s the best way to get the deficit down. At the moment it seems George Osborne is still in denial about the state of the economy and the tough times families are facing this year…

“He’s got two weeks to come up with a plan B for the Budget – a plan that puts jobs and growth first, gets our economy growing strongly again and eases the pressure on millions of families feeling the squeeze. Don’t hold your breath.”

Earlier today, Balls launched a pre-Budget campaign to reverse the VAT rise on fuel, which has added nearly 3p to the cost of a litre of unleaded petrol – £1.35 to the cost of a filling up a 50-litre tank – and helped to push petrol prices to record levels.

He said:

“Families are already facing their incomes squeezed this year and events in the Middle East and North Africa are helping to push up oil prices around the world. But in Britain George Osborne is making things much worse, not better, for families and pensioners with his hike in VAT.

“Conservative cabinet ministers have dismissed the impact of their VAT rise, but it has added £1.35 to the cost of filling up a 50 litre tank. George Osborne should admit he got it wrong, immediately reverse the VAT rise and ease the pressure on families right now.”

Research by the House of Commons Library revealed that the rise in VAT is adding 2.71p to the cost of a litre of unleaded petrol, assuming a pump price of 130p; based on these figures, the VAT rise has added £1.35 to the cost of filling up a 50-litre tank, with the extra cost for annual mileage of 10,000, 20,000 and 50,000 miles around £30, £60 and £150.

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