With VAT increasing from 17.5% to 20% on the 4th of January, Chancellor of the Exchequer George
Osborne has defended the move as “the least damaging” option.
Labour MPs have expressed opposition to the rise, with Shadow Chancellor Alan Johnson slating it
as “the wrong tax at the wrong time”, and condemning the decision as “typical of a government that
cares little about the impact of their plans on ordinary working people”.
The new rate represents the highest level for standard-rate Value Added Tax (VAT) since it was
introduced in 1973, and the arguments over the rise highlight a fundamental conflict between
Labour and the Conservative-led coalition government’s policies. While Labour argue that increasing
National Insurance would be a better way to tackle the budget deficit, the Chancellor continues to
defend the VAT rise as a “tough but necessary step towards Britain’s economic recovery”.
The VAT increase is projected to raise over £13 billion per year, boosting public finances in a bid to
support broader economic recovery. However, this argument has done little to mollify Labour’s
reaction to the policy – opposition leader Ed Miliband has accused the Chancellor of misleading the
British people, calling for him to admit that “it’s poor and middle-income families that will be hit
hardest” by the hike.
