My speech on Labour’s VAT pledge – 27th March 2015

Thank you to Shabana for that introduction.


Not only are you a great campaigning Labour MP, here in Birmingham.


You are also a hugely valuable member of the Labour Shadow Treasury team – working with Ed Miliband and me on our plans for government – from boosting regional growth and supporting business innovation to tackling tax avoidance across our tax system.


And you know how across this city people have been hit hard by the cost-of-living crisis and the rise in VAT.


Here in Birmingham, and across the country, people are not feeling the recovery.


And while the current falls in global oil prices have led to temporarily very low inflation, wages remain stagnant and family budgets are under great pressure.


The last thing people want to hear is a Conservative Chancellor telling them they’ve never had it so good.


And they are even more worried after a Budget which did little for working people, nothing for our National Health Service and announced plans for deeper spending cuts in the next three years than we have seen in the last five years.


So today I want to talk about the threat to living standards from another five years of the Tories.


About VAT.


And about Labour’s pledge to the British people.


VAT is the tax that hits everyone – with the same rate paid by the pensioner as the millionaire.


It’s the tax that hits you every day – whether you’re stopping at a café for a cup of tea or filling up the family car.


It’s the tax that you pay from the first pound that you spend.


And it’s the tax that hits pensioners and the poorest hardest.


For many pensioners and those on the lowest incomes, it’s the biggest tax they pay.


But the Tories and Lib Dems raised it within weeks of the last general election – despite David Cameron telling the British people a few days before the election that he had ‘no plans’ to do so and despite the promises of Nick Clegg.


That Tory VAT rise hit the living standards of millions of people.


It led to higher prices for everyone – helping inflation hit 5.2 per cent when it was raised.


And over the last four years it has cost families an average of £1800, according to the Treasury’s own figures.


Since 2010, David Cameron and George Osborne have shown their true instincts and values through the choices they have made.


And their choice was to raise VAT on pensioners and working families, while giving the top one per cent of earners a £3 billion a year top rate tax cut.


VAT is the tax that every Tory government in the last forty years has raised.


But no Labour government has ever hiked up the main rate of VAT.


And it was Labour that stopped Norman Lamont raising VAT on fuel to 17.5 per cent in 1994 – the defeat which cost the Conservative Chancellor his job.

We will make our tax commitments in full in our manifesto.


But I am clear that while millionaires have been given a huge tax cut, working people are paying more in tax after the last five years of the Tories.


So today I can announce a clear pledge to the British people:


The next Labour government will not raise VAT.


We will not put up VAT.


And we will not extend it to food, children’s clothes, books, newspapers and public transport fares.


We will not raise VAT because it’s the tax that hits everyone. It’s the tax that hits you every day. And it hits pensioners and the poorest hardest.


I would resign rather than break this promise and hike up VAT.


And Labour can make this manifesto commitment for the next Parliament because, unlike the Tories, all of our promises are fully funded and paid for.


Where we need to raise extra revenue for Labour’s better plan we have been clear where it will come from – however controversial:


A mansion tax on properties over £2 million, a levy on the tobacco companies and closing tax loopholes to save and transform our NHS with an extra 20,000 nurses, 8,000 more GPs and cancer tests guaranteed in a week.

Reversing this government’s top rate tax cut for people earning over £150,000 to help get the deficit down in a fairer way, as we balance the books in the next Parliament.

A one-off tax on bank bonuses to fund a paid starter job for every young person out of work for 12 months or more – which they will have to take up.

Scrapping the unfair married couples allowance, which will only help one in three married couples, and using the money to instead introduce a lower 10p starting rate of tax – which will help millions more married couples, more families and more working people.


Not going ahead with a further cut in corporation tax for large companies, but instead cutting and then freezing business rates for small firms.

Reducing the amount of pension tax relief given to the highest earners to pay for a cut in tuition fees to £6,000 – cutting not only the burden of debt on graduates, but reducing the national debt too.


Closing tax loopholes and scrapping the shares for rights scheme so we can scrap the unfair and hated Bedroom Tax


And a higher bank levy to pay for expanding free childcare for working parents of three and four year olds – from 15 to 25 hours a week – to help make work pay and help parents balance work and family life.


Every one of these measures is fully costed, fully funded and every one has been opposed by the Tories.


Labour will not raise VAT. But the Tories will – again – as our new poster warns today.

Because it’s now clear the only way the Tories can make their sums add up on their extreme plans is to raise VAT again after the election.


In last week’s Budget the Tories confirmed plans which go beyond simply balancing the books.


Plans for extreme spending cuts which are a grave threat to our living standards and our public services.


As the independent Office for Budget Responsibility said, these Budget plans will mean “a sharp acceleration” in cuts to public spending.


They mean deeper spending cuts in the next three years than the last five years.


In fact, as the Institute for Fiscal Studies said, the Budget plans mean spending cuts after the election twice as deep as anything seen in the last five years.


The extreme cuts to public services like police, defence and social care under these plans would be so deep they’d be almost impossible to achieve, even for this Chancellor.


And the Tories have also made £10 billion of unfunded tax promises – which they have still not told us how they will pay for.


That’s why people will conclude that to make their sums add up the Tories will end up putting our NHS at risk and raising VAT again.


And, of course, the Tories have form when it comes to VAT.


It’s the Conservative Party’s favourite tax to raise.


Just look at the history.


Edward Heath introduced it and every single Conservative Prime Minister since him has raised it – first Margaret Thatcher, then John Major and now David Cameron.


Before the 1979 General Election, Geoffrey Howe said he had “absolutely no intention of doubling VAT”.


But in his first Budget, just weeks after the Tories were elected, he raised VAT from eight per cent to 15 per cent.


Conservative Party papers uncovered in the 1990s showed that the Tories had been secretly planning this VAT hike 11 months before the General Election.


In 1991, another Conservative Chancellor Norman Lamont increased VAT again – from 15 per cent to 17.5 per cent.


And in the 1992 Budget, which took place less than six weeks before the General Election, Chancellor Lamont told the House of Commons:


“I have no need, no proposals and no plans either to raise or to extend the scope of VAT.”


But after winning the 1992 election, the Conservatives raised VAT again – introducing VAT on domestic heating and fuel in the 1993 Budget – at an initial rate of 8 per cent.


If the Tories had got their way VAT on gas and electricity bills would have reached 17.5 per cent in April 1995.


But Labour MPs defeated the Tories on this in the House of Commons.


And in our first Budget after the 1997 election, the Labour government reduced VAT on fuel to five per cent – the lowest possible rate under EU rules.


Before the last election David Cameron and George Osborne repeatedly claimed they had “no plans” to raise VAT – the same phrase used by their Tory predecessors.


Then just a few weeks after the election they raised it in the first Tory Budget – from 17.5 per cent to 20 per cent – hitting the living standards of millions of people.


The Treasury’s own figures show that it cost a family with children £450 a year – or £1800 over the four years it has now been in place.


They even tried to put VAT on pasties and caravans.


And now history is repeating itself all over again.


Just as before the last election David Cameron and George Osborne repeatedly claimed they had “no plans” to raise VAT – and we all know what happened next – so now in the last few weeks David Cameron and George Osborne have again repeatedly refused to rule out raising VAT again to pay for their promises.


In November George Osborne was asked if he would raise VAT and he said: “We don’t have any plans.”


Asked again last week, he said that another rise in VAT was “not part of our plans”.


Ring any bells?


It’s the same Tory lie about VAT: 1979, 1992, 2010 and now 2015.


And everybody in the country knows what it means.


The Tories have a secret plan to raise VAT again.


Another 2.5 per cent rise in VAT would, according to the Treasury’s own figures, cost a family with children an average of £450 a year and a pensioner couple £275 a year.


Because rather than asking those with the broadest shoulders to make a greater contribution, VAT has always been the Tory tax of choice.


In his spectacularly self-indulgent, presumptuous and arrogant announcement David Cameron is ruling out a third term before he has even won a second term. But he won’t rule out raising VAT.


We may not now know who the Tory leader would be at the next election, but one thing we do know for sure – the Tories will ‎raise VAT if they win this one.


Because the Tories’ extreme spending plans and unfunded promises mean they’ll end up raising VAT to make their sums add up.


Tory governments always raise VAT. They did it last time and if they’re given another chance they’ll do it again – hitting millions of pensioners and working families.


David Cameron is taking the British people for granted, but it’s for the voters to make their choice on 7 May.


So the choice at this general election is clear.


A choice between a Tory plan that is failing working families and a better Labour plan that will put working families first and save our NHS.


A choice between an extreme plan that goes beyond balancing the books or Labour’s sensible and balanced plan to get the deficit down – with sensible spending cuts, fair choices on tax and a plan to boost the living standards and wages of working people.


A choice between a Conservative Party which has a track record of raising VAT and has a secret plan to raise it again after the election – hitting the living standards of millions of people in the country.


Or a Labour Party which has never raised the main rate of VAT and will not raise VAT if we win the election.


In six weeks’ time we can stop the Tories hitting people with another hike in VAT – a Tory tax which hits everybody, every day.


Because working families and pensioners can’t afford five more years of the Tories.


Thank you.

Posted November 9th, 2015 by admin