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Tories and Labour have boxed themselves in on taxation, claims IFS Tories and Labour have boxed themselves in on taxation, claims IFS
(about 5 hours later)
David Cameron and Ed Miliband have “boxed” themselves in on taxation after a bidding war led Labour and the Tories to rule out major increases in Britain’s three main taxes that raise 60% of revenues, the Institute for Fiscal Studies (IFS) has warned. David Cameron and Ed Miliband have “boxed themselves in” on taxation after a bidding war led Labour and the Tories to rule out major increases in Britain’s three main taxes that raise 60% of revenues, the Institute for Fiscal Studies (IFS) has warned. The IFS said that in the event of an economic downturn, Labour and the Tories would find themselves with little room for manoeuvre in the next parliament, after the most significant announcements on tax of the election by the two main parties.
The IFS said that in the event of an economic downturn, Labour and the Tories would find themselves with little room for manoeuvre in the next parliament, after the most significant announcements on tax of the election by the two main parties. Cameron caused surprise among his ministers – and briefly wrong-footed the Labour leader – when he ruled out an increase in VAT after the next election in the final session of prime minister’s questions before the election. Within an hour, Ed Balls had ruled out rises in national insurance and in the basic and higher rates of income tax in an attempt to neutralise claims by the prime minister that Labour was planning to introduce a tax “bombshell” after the election.
Cameron caused surprise among his ministers – and briefly wrong footed the Labour leader – when he ruled out an increase in VAT after the next election in the final session of prime minister’s questions before the election. Within an hour Ed Balls ruled out rises in national insurance and in the basic and higher rates of income tax in an attempt to neutralise claims by the prime minister that Labour was planning to introduce a tax “bombshell” after the election. The exchanges between the two parties mean that Labour and the Tories will now hold back after the election from introducing major increases in the three main taxes – VAT, national insurance and income tax. The Tories have already said they have no plans to raise income tax in the next parliament, while Labour will only raise the top rate of income tax from 45% to 50%.
The exchanges between the two parties mean that Labour and the Tories will now hold back after the election from introducing major increases in the three main taxes – VAT, national insurance and income tax. The Tories have already said they have no plans to raise income tax in the next parliament while Labour will only raise the top rate of income tax from 45% to 50%.
The world is uncertain and sometimes things don’t go to planThe world is uncertain and sometimes things don’t go to plan
The announcements prompted a war of words between Labour and the Tories in which they both claimed that each side’s numbers did not add up. Labour said that the Tories would have to impose “savage” public spending cuts after closing off introducing a VAT rise, as George Osborne did in his emergency budget after the 2010 election. The Tories claimed that Labour’s decision not to spell out in details its plans for cuts, while ruling out an increase in national insurance, means it will have to delay its deficit reduction plans. The announcements prompted a war of words between Labour and the Tories in which they both claimed that each side’s numbers did not add up. Labour said that the Tories would have to impose “savage” public spending cuts after closing off a VAT rise, as George Osborne did in his emergency budget after the 2010 election. The Tories claimed that Labour’s decision not to spell out in details its plans for cuts, while ruling out an increase in national insurance, means it will have to delay its deficit reduction plans.
Carl Emmerson, the deputy director of the IFS, said that both parties will find their pre-election commitments might cause them trouble if the economy slows down. Emmerson told the Guardian: “It is not clear that you want to box yourself in like this when you realise the world is uncertain and sometimes things don’t go to plan. It does offer some constraint. And the other taxes might not be so attractive, either. One of the biggest remaining ones is fuel duty. People seem to struggle to increase it in line with inflation, let alone really increase it.” Carl Emmerson, the deputy director of the IFS, said that both parties might find their pre-election commitments causing them trouble if the economy slows down. Emmerson told the Guardian: “It is not clear that you want to box yourself in like this when you realise the world is uncertain and sometimes things don’t go to plan. It does offer some constraint. And the other taxes might not be so attractive, either. One of the biggest remaining ones is fuel duty. People seem to struggle to increase it in line with inflation, let alone really increase it.”
The IFS issued its warning after a dramatic finale to the 2010-15 parliament, which will sit for the last time on Thursday before it is formally dissolved on Monday. The prime minister was cheered by Tory MPs after he moved to close off one of the main lines of attack from Labour by ruling out an increase in VAT in a one-word answer to Miliband. “Yes,” the prime minister said when the Labour leader asked him to rule out an increase.The IFS issued its warning after a dramatic finale to the 2010-15 parliament, which will sit for the last time on Thursday before it is formally dissolved on Monday. The prime minister was cheered by Tory MPs after he moved to close off one of the main lines of attack from Labour by ruling out an increase in VAT in a one-word answer to Miliband. “Yes,” the prime minister said when the Labour leader asked him to rule out an increase.
The prime minister’s announcement surprise some of his own minsters. Priti Patel, the Treasury minister, said she had not been informed of the move. The prime minister’s announcement surprised some of his own minsters. Priti Patel, the Treasury minister, said she had not been informed of the move.
In their last parliamentary exchanges before the election, Cameron scored a clear victory over Miliband who appeared briefly surprised by the prime minister’s answer on VAT. The Labour leader paused briefly before saying: “Let me say to him nobody is going to believe him. Nobody is going to believe it because of his extreme spending plans, because his numbers don’t add up and because he promised it last time and he broke his promise.” In their last parliamentary exchanges before the election, Cameron scored a clear victory over Miliband, who appeared briefly blindsided by the prime minister’s answer on VAT. The Labour leader paused briefly before saying: “Let me say to him, nobody is going to believe him. Nobody is going to believe it because of his extreme spending plans, because his numbers don’t add up, and because he promised it last time and he broke his promise.”
The prime minister then moved to turn the tables on Miliband by asking whether he would rule out increasing national insurance contributions. The Labour leader declined to answer the prime minister’s question, moving on to a new subject by asking whether the prime minister would admit he had broken his target to cut net migration to the tens of thousands.The prime minister then moved to turn the tables on Miliband by asking whether he would rule out increasing national insurance contributions. The Labour leader declined to answer the prime minister’s question, moving on to a new subject by asking whether the prime minister would admit he had broken his target to cut net migration to the tens of thousands.
In an echo of the language deployed by the Tories in the 1992 election campaign, when John Major defied the polls to win a majority, the prime minister said: “So, we know there is a tax bombshell coming from Labour and it is going to be, we learned today, a jobs tax bombshell … It would wreck our economy.”In an echo of the language deployed by the Tories in the 1992 election campaign, when John Major defied the polls to win a majority, the prime minister said: “So, we know there is a tax bombshell coming from Labour and it is going to be, we learned today, a jobs tax bombshell … It would wreck our economy.”
Balls moved to clarify Labour’s position within an hour. He told the BBC: “We have clear pledges. No rise in VAT under Labour, no rise in the basic and higher rates of income tax under Labour, no rise in national insurance under Labour. Balls moved to clarify Labour’s position within an hour. He told the BBC: “We have clear pledges. No rise in VAT under Labour, no rise in the basic and higher rates of income tax under Labour, no rise in national insurance under Labour. Working people have suffered enough under these Tories. It is right for us to say those on the highest incomes with the broadest shoulders should pay more – the bank-bonus tax, the mansion tax. Our plans add up, theirs don’t. As night follows day, if people vote Tory, VAT will go up. It always does and it will again.”
“Working people have suffered enough under these Tories. It is right for us to say those on the highest incomes with the broadest shoulders should pay more – the bank-bonus tax, the mansion tax. Our plans add up, theirs don’t. As night follows day, if people vote Tory, VAT will go up. It always does and it will again.”
Miliband’s failure to answer the prime minister’s challenge on national insurance suggested that Labour had been trying to keep its options open. Balls said he had made clear in recent days that he had no plans to raise this as he said the prime minister’s VAT pledge was not believable.Miliband’s failure to answer the prime minister’s challenge on national insurance suggested that Labour had been trying to keep its options open. Balls said he had made clear in recent days that he had no plans to raise this as he said the prime minister’s VAT pledge was not believable.
The prime minister rejected Labour’s criticisms when he addressed the final meeting of the 1922 committee before the election. A cabinet minister said: “Our plans add up. We have said that the only tax increases we are planning will be to raise £5bn in tax avoidance. We will cut the welfare budget by £12bn. Our plans have all been costed, unlike Labour’s plans.”The prime minister rejected Labour’s criticisms when he addressed the final meeting of the 1922 committee before the election. A cabinet minister said: “Our plans add up. We have said that the only tax increases we are planning will be to raise £5bn in tax avoidance. We will cut the welfare budget by £12bn. Our plans have all been costed, unlike Labour’s plans.”