Labour and the Conservative parties have both vowed not to raise the value added tax (VAT) if they win the general election. Jeremy Hunt, the Chancellor of the Exchequer, said in an article in The Telegraph that the Tories wouldn’t increase the main rate of VAT in the next Parliament. Shortly after, shadow chancellor Rachel Reeves echoed this pledge, calling claims of a planned VAT rise “nonsense”.
The two main parties have been trading blows over their spending plans ahead of the formal five-week election campaign, which began on Thursday. Labour has promised to provide economic stability if it takes office and has specifically committed not to raise income tax or National Insurance (a payroll tax paid by employers and employees). On Tuesday Reeves indicated that no further tax rises were planned.
Labour has already stated that it would charge VAT on fees paid to private schools in order to hire more state school teachers. However, Reeves refused to rule out raising VAT for other purposes. Meanwhile, Hunt has warned that a VAT rise would hurt families’ finances and also risk driving inflation above 2%, a level towards which it is currently returning.
The Tory Chancellor has claimed credit for the move, asserting that Labour had “buckled under pressure” to follow the Conservative example. Both parties have pledged not to raise VAT, income tax or National Insurance, or to allow government debt to rise as a share of GDP over the course of the next Parliament. The Institute for Fiscal Studies (IFS) last week warned that debt and low economic growth constituted a dark cloud over the election campaign
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