Tories refuse to rule out VAT increase

As well as hitting the poorest through a freeze on working-age benefits, the Tories may also be planning to hit them again with a hike in VAT.

As well as hitting the poorest through a freeze on working-age benefits, the Tories may be planning to hit them again with a VAT hike

Just 24 hours after making a conference speech in which he promised tax cuts for ’30m people’, David Cameron has refused to rule out an increase in the rate of VAT to pay for it.

The promises made by Cameron yesterday, which included raising the threshold for those paying the 40 per cent rate of income tax and increasing the personal allowance, are set to cost over £7bn to fund.

Asked today about his party’s £7bn spending committment, Conservative Party chairman Grant Shapps refused to rule out increasing the rate of VAT in government:

Jo Coburn: Are you ruling out a rise in VAT?

Grant Shapps: Well I have absolutely no intention of writing future Budgets on your programme…

BBC Two: Daily Politics, 2 October, 2014

The government has already put up VAT once, from 17.5 per cent to 20 per cent in January 2011, and is now refusing to rule out doing so again. VAT is considered a regressive form of taxation as the proportion of an individual’s taken by the tax falls as they move up the income scale – as this (albeit dated) graph from Tax Research UK demonstrates:

VATj

And as the report states:

“On this basis an unambiguous conclusion can be drawn: VAT is regressive.”

So as well as hitting the poorest third of the population through a freeze on working-age benefits, the Tories may also be planning to hit them again through a hike in VAT.

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