PA | Monday, 3 January 2011
The 2.5% hike in VAT which comes into effect at midnight tonight will cost families almost £400 a year and put up to 250,000 jobs at risk, Labour leader Ed Miliband warned today.
He accused both of the parties in the ruling coalition of breaking election promises on tax, reminding voters that Liberal Democrat leader Nick Clegg campaigned against a “Tory VAT bombshell”, while Conservatives promoted a “fuel duty stabiliser” to reduce levies on petrol when prices are high at the pump.
The increase to 20% will force up the cost not only of a tank of petrol, but also of regular purchases like a mobile phone call, cup of coffee or DVD, he said.
But he was accused of “opportunism” by Chancellor George Osborne, who challenged him to explain what he would cut to make up for the revenue he would lose by scrapping the planned VAT increase.
“VAT is a powerful weapon to tackle debt and if we don’t use it then the spending cuts would be over £13 billion pounds bigger,” said the Chancellor.
“When Labour was in government they accepted this, which is why Alistair Darling says he wanted to put up VAT. Now Labour is in opposition, Ed Miliband has shown weak leadership by jumping on the bandwagon of opportunism.
“The question Ed Miliband faces is this: if you’re not raising VAT, where are the extra £13 billion of spending cuts coming from? The NHS? Schools?”
A report from the Centre for Retail Research today forecast that consumers will reduce their spending by £324 on average this year as a result of the tax increase, cutting UK retail sales by £2.2 billion in the first three months of 2011 alone.
And Bob Crow, general secretary of the RMT transport union, said the VAT hike, announced in Mr Osborne’s June 2010 budget, would “raise the bar in pay negotiations this year as we fight to defend our members’ standards of living”.
Campaigning in the Oldham East and Saddleworth by-election, Mr Miliband said it was “the wrong tax at the wrong time” for the economy.
“The squeeze starts here,” he said. “The squeeze designed in Downing Street which will come to your street, to the High Street, to every street up and down the country.”
Mr. Miliband said the estimate that the hike would cost families £389 a year was “not my figures, but Nick Clegg’s figures from the last general election, when he went round the country and said ‘stop the Tory VAT bombshell’.
“He didn’t tell us that he would be standing by and applauding as George Osborne dropped the VAT bombshell.”
And he added: “This Conservative-led Government has begun 2011 breaking the promises they made in 2010.
“They promised the fuel-duty stabiliser. Fuel prices are now at a record high. And what is this Conservative-led Government doing? They are putting up the duty. It is another broken promise.”
The January 13 by-election, triggered when Labour’s Phil Woolas was removed as an MP for misrepresenting his Liberal Democrat rival in election leaflets, offers the parties’ first major test at the polls since formation of the coalition Government last May.
The seat saw New Year Bank Holiday visits from all three parties, with Mr Miliband joined by Lib Dem president Tim Farron and Tory chairman Baroness Warsi pounding the streets of Oldham.
Mr. Farron said: “People in Oldham and Saddleworth deserve better than an MP from a party that would’ve stood idly by and watched Britain head towards Irish-style collapse. Tough decisions protect Britain, not opportunistic complaining and blank pages.
“This new year the Liberal Democrats are making the positive difference in Government. We’re all working to clean up after Labour’s disastrous 13-year house party. Ed Miliband’s still the sulky teenager trying to pretend it wasn’t his fault.”
The constituency was a three-way marginal in the 2010 election, with Liberal Democrat Elwyn Watkins trailing Mr Woolas by just 103 and Conservative Kashif Ali fewer than 2,500 votes behind them.
But Mr Miliband said there were only two choices for voters – between the two coalition parties which both support the VAT hike and Labour, which thinks the Government is cutting spending “too far and too fast”.
Prime Minister David Cameron has fuelled suspicions that his party will not mount a serious challenge for the seat by wishing the Lib Dem candidate well in a pre-Christmas press conference.
Senior Tory backbencher Mark Pritchard, secretary of the backbench 1922 Committee, today demanded “clarity” from the party’s leadership over whether they are contemplating an electoral pact with their coalition allies.
“It is not a criticism of the Prime Minister, it is an encouragement that the party leadership must understand the mandate for a coalition agreement is a temporary one – it is not a permanent one,” Mr Pritchard told BBC Radio 4’s Today.
But Lib Dem deputy leader Simon Hughes insisted that there was “no deal” with Tories to give Mr Watkins a free run in the by-election battle.
And he dismissed suggestions the parties might field joint coalition candidates: “I can see no prospect that at the next general election there will not be a full slate of Liberal Democrat candidates in every seat in the country.”