Conservatives and Labour in spat over VAT hikes

Conservatives and Labour in spat over VAT hikes

Jun 1, 2024

In the latest clashes over tax policy, Jeremy Hunt and Rachel Reeves have ruled out any increases to VAT rates after the election

VAT is a massive earner for any government, raising £169.25bn in tax year 2023-24 and is the third highest tax generator after income tax and national insurance. It is also a hugely regressive tax.

The last time VAT was increased was in January 2011 when the incumbent Chancellor George Osborne hiked the 17.5% rate to 20% in the first Budget of the Conservative Liberal Democrat coalition held in June 2010.

Chancellor Jeremy Hunt has confirmed that the Conservatives have no intention of raising VAT from the current standard 20% rate if they win the general election, after accusing shadow chancellor Rachel Reeves of ‘plotting’ a VAT ‘raid’ if Labour take power. He also accused her of ‘flip-flopping’ over tax plans, while the Conservative Campaign HQ tweeted about Labour, stating that ‘Overnight they’ve been bounced into a VAT pledge they hadn’t planned’.

The accusations were strongly rejected by Reeves, who issued a statement stating that Hunt’s claims were ‘absolute nonsense’, adding ‘I want taxes on working people to be lower not higher’.

Labour shadow chief secretary to the Treasury posted on X/Twitter: ‘Working people are paying more tax because the Conservatives increased taxes. A future Labour government wants taxes to be lower. We will not increase income tax, national insurance or VAT.’

On the Today programme on Radio 4, Hunt ruled out any VAT rise but confirmed that frozen thresholds would remain until April 2028, while he pushed the argument that the Conservatives ‘will not increase income tax’ when pressed by BBC presenter Nick Robinson.

‘Let’s be crystal clear, in autumn of 2022 I took very difficult decisions to increase taxes and now in my Budget and in the Autumn Statement last year I started to bring them down. Have I been able to cancel out all those tax rises, no, but I had to make that commitment,’ Hunt said.

‘I can absolutely undertake that the threshold freeze that we introduced until 2028 will not continue after that.

‘We are not going to increase income tax beyond the rates it is currently set at, nor national insurance which we hope to bring down, and nor VAT.’

Labour plans to remove the VAT exemption on private schools which will see a 20% VAT charge on fees if they win the election, closing a tax loophole which uses charitable status rules.