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Monday, August 10, 2009

Phoney war

It is summer, it is the silly season, so nobody was really surprised at headlines over the weekend that the Tories planned to put VAT up to 20%. Equally it is natural that the Tories have denied it is true or have they?

Knocking down reports that an "emergency budget" was being drawn up as a Conservative government's opening salvo, Andrew Lansley, the shadow health secretary, said there had been no discussions about the tax rise at a senior level. But the shadow foreign secretary William Hague – described by Cameron as his "deputy in all but name" – was more circumspect, stopping short of categorically ruling it out.

Though a VAT rise to 20% would be politically unpopular, the Tories were reported to be considering a swift budget in the first few weeks of a new adminstration, with the virtue they could plausibly blame painful economic decisions on the outgoing government. An increase to 20% would raise £10bn.

Hague told Sky News: "There are no plans in existence in the Conservative party for such a VAT rate and you can't ask George Osborne to write the 2010 budget now, given the shocking state of the nation's finances."

All the parties need to explain how they are going to get us out of the mess we are in and the Tories are no exception. However, the more Cameron and Co. prevaricate the more we are going to make up our own stuff about them.

In particular it will be recognised that VAT is a regressive tax that hits the poorest and middle income earners the hardest because they spend more of their wages than the rich. If VAT is to be the Tories get out of jail card and partially used to fund a reduction in inheritance tax then effectively they will be asking some of the hardest pressed families in Britain to effectively fund a tax cut for the 3,000 richest people in Britain and their estates.

How does that fit in with Cameron's compassionate conservatism?
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