Managing Your Cash Flow
David Cameron answers Labour challenge during PMQS with surprise announcement on VAT
4 min read
26 March 2015
In the last session of prime minister's questions before the general election, David Cameron promised the Conservative party will not increase VAT if they come back into power.
The announcement came as Miliband joked that Cameron had “announced his retirement plans” in reference to a BBC interview where the prime minister suggested that he “would not serve a third term if the Tories remained in power”.
Miliband then pressed him for “a straight answer to a straight question” about whether he really intended not to increase VAT.
Cameron said: “The answer is yes”
He then responded by questioning whether Labour would implement a “jobs tax that would clobber workers”.
“I answered a very simple question about VAT,” said Cameron. “I ruled out an increase. Straight answer to him, straight question from me. I have ruled out VAT. Will he rule out national insurance (NI) contributions. Yes or no?”
When Miliband refused to answer in the Commons, Cameron 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,” he added.
His challenge appeared to surprise the Labour party and a few of his own ministers. According to Treasury minister Priti Patel, she was never told of the move.
Due to this, Labour was forced to provide a planned manifesto pledge on tax rates.
After prime minister’s question time, Ed Balls later 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.”
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He also mentioned that Miliband had not made the commitment during question time because he believed it was “not the right time”.
Balls pointed out that a similar Tory pledge in 1992 was broken a year later. And in 2010 George Osborne raised VAT from 17.5 per to 20 per cent after Cameron stated there were “absolutely no plans” to do so.
“They are in a post-budget panic,” Balls said. “They are spooked and making up policy on the hoof. Nobody will believe a panicked prime minister making things up on the hoof but actually unable to answer the questions about what his cuts will really mean.”
This was echoed by Miliband: “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.”
Osborne suggested that Labour’s economic policy “is in crisis”.
“They oppose all spending cuts, say they’ll balance the books and now expect people to believe they won’t put up taxes including the jobs tax,” he said.
“It simply doesn’t add up. Ed Miliband and Ed Balls really are making it up as they go along. If you were in government and you behaved like this, it would plunge the economy into chaos – and families would pay the price in lost jobs, rising debts and falling living standards.”