Tuesday 6 April 2010

Has Osborne kept open the "Geoffrey Howe dodge" on VAT?

Tim Montgomerie, the editor of ConservativeHome, has previously pitched the idea of admitting VAT should rise to 20% to close the deficit, as the best response to Labour's challenge on the issue: "I think voters are ready for honesty and the markets need reassuring", he wrote before Christmas.

Advice not taken. So, today, Montgomerie extols the virtue of George Osborne saying he has "no plans" to put VAT up, as the campaign opens.

This is a significant commitment from the Shadow Chancellor. Labour hope to scare voters with the threat of a large VAT increase if the Tories win. Cameron and Osborne have attempted to strangle this attack at birth.

Attempted, maybe.

But surely nobody with a grasp of election history would think that the Shadow Chancellor has achieved that.

For two reasons.

First, surely, "the plans do not include an increase in VAT" is a non-denial.

Secondly, the lesson from history is that we have been here before, and more than once.

In 1978, the Tories did have a secret plan to increase VAT. Yet in the 1979 campaign, CCHQ encouraged the Daily Mail to attack Labour claims of a secret Tory plan to double VAT as one of “Labour’s dirty dozen lies”.

As the FT's Alex Barker reported in his account of the 'legendary Geoffrey Howe dodge on VAT, the former Chancellor rejected the idea that it was misleading to state that “we have absolutely no intention of doubling VAT” during the 1979 campaign.

Howe wrote in his memoirs, somehow keeping a straight face, that:

"We had no difficulty denying it. For there was no prospect, on even the most gloomy of expectations, of our having to go beyond a rate of 15 per cent. Some critics afterwards thought it pedantically misleading to rest our case on the fact that twice 8 per cent (the then basic rate) was 16 and not 15 per cent ..."

In 1992, Labour portrayed Norman Lamont as the caped crusader 'VATman'. Again, there were no plans. In 1993, the proposals was made to put full VAT on domestic fuel bills as part of the £20 billion tax hike package.

Will history repeat itself a third time? Given that evasive election history on VAT, it would take a much firmer denial to close VAT down as a campaign issue.

1 comment:

Letters From A Tory said...

VAT is a messy one as it could hit a lot of businesses.

Then again, the 2.5% temporary cut that Darling introduced achieved absolutely sod all so perhaps a rise won't change much either!