Hague’s tax claims at odds with IFS

On the Today programme this morning, William Hague again employed the ‘Geoffrey Howe dodge‘ and claimed that the Tories do not have “plans” to raise VAT. But his claims that “we are not looking for tax rises” is at odds with analysis from the Institute for Fiscal Studies showing the Tories have a blackhole in their tax plans.

The IFS analysis on the ‘Conservative plan to cut public spending to cut National Insurance’ last week said:

“The Conservatives argue that this reform would shift the balance of the looming fiscal tightening from the one-third tax increases and two-thirds spending cuts planned by the Government in 2013–14 towards one-fifth tax increases and four-fifths spending cuts. This is true in isolation, but we also know that the Conservatives wish to tighten fiscal policy more quickly over the coming Parliament…

“To aim for a roughly 80:20 ratio implies … roughly £4 billion of tax increases and £14 billion of spending cuts.”

As the Telegraph made clear this morning, “Each percentage point increase in VAT costs consumers a total of £4.5 billion, equal to £180 a year for every household.” On the Today programme, William Hague spoke to John Humphries:

JH: Why do you not simply say “we know we’ve got to either cut or to raise a lot more money; the way you raise a lot more money is to put up VAT”. Why don’t you do that?

WH: Because the plans we have don’t involve raising VAT. By the way there are other tax rises that the Labour party are leaving in the system and what we are looking at what George Osborne has explained is in the cutting of the deficit that tax rises should only play about 20% of the full part of that and most of those tax rises are already in the system so there is no need there to raise VAT. All the parties are in the same position on VAT except the only party that we know of that had a plan to raise VAT was the Labour government in the run up to last year’s budget.

JH: …you can see the serious merit in raising VAT…it is a sensible way of raising money isn’t it?

WH: But we are not looking for tax rises, go around the country, people feel overtaxed. People know that they are paying so much in tax already and they don’t feel they are getting a fair return for it, so we’re not sitting here working out what whopping tax increase to land people in.

Listen to it (02:42 – 04:46):