Labour’s manifesto: no increase in VAT

Ed Balls will announce the pledge in a speech today

Despite businesses no doubt hoping the next government will lower VAT, the best we’re likely to get after the election is a freeze.

Shadow chancellor Ed Balls will tell voters in Birmingham today that the Labour Party does not plan to increase VAT.

He will say: “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.”

He will add: “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.”

This is fully costed, Labour will say, through an increase in tobacco tax and the so called “mansion tax”.

However, the Conservatives said Labour would increase other taxes to compensate. The Tories said they would not increase taxes, instead planning to make further cuts and tackle tax avoidance.

What is VAT?

VAT, which stands for Value Added Tax, is a 20% tax on goods and services (except some items such as food and children’s clothing). It’s applied at the point of sale, meaning the Treasury essentially adds 20% to the pricetag of each item.

The rate has varied over time and been changed by successive governments. In 2008, to boost trade around the start of the recession, Gordon Brown’s government lowered the rate from 17.5% to 15% for two years.

In the run up to the general election, the Conservatives denied they planned to increase the VAT rate, however, in George Osborne’s 2010 emergency Budget , the rate was increased to 20% where it has stayed ever since.


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