Jo has hit back after an attack from local MSP David Whitton, accusing him of “cynical opportunism”.
Mr Whitton wrote to Jo last week asking her to vote against the 2.5% VAT rise announced in the Chancellor’s emergency Budget in June. The change will raise £13 billion toward tackling the £155 billion annual shortfall in the Nation’s finances.
Jo has written an open letter in response to David Whitton, setting out the urgent need to tackle the deficit and asking where the £44 billion of cuts that Labour promised before the election would have fallen.
In his response, David Whitton said he could not answer this question.
Commenting, Jo said:
“Labour’s rage over this issue is little more than cynical opportunism. Mr Whitton tells us that Labour reject the VAT increase as part of their deficit reduction plan, but the truth is they don’t have any kind of plan at all. We now know from Lord Mandelson’s memoirs that Labour’s own Shadow Chancellor Alistair Darling believes that raising VAT is necessary to tackle the deficit.
“Any tax rise is unwelcome, but taxation has to take some of the burden as we start tackling Labour’s deficit. We know that Labour’s last budget committed them to £44 billion of spending cuts which have not been accounted for. Before Labour can credibly criticise the coalition’s deficit reduction plans, they need to come clean on Labour’s own plans for cuts. Despite being a Labour finance spokesperson, when I asked Mr Whitton to explain where this £44 billion would have come from, he refused.”
The text of Jo Swinson’s letter to David Whitton appears below:
Thank you for your letter regarding the Budget proposal to raise the level of VAT to 20%.
The past 13 years of Labour government has left the country with a £155 billion annual budget deficit in 2010/11 – the largest budget deficit in Europe in 2010. This deficit stands on top of a total national debt of £932 billion, on which taxpayers are paying tens of billions of pounds in interest each year – money which could otherwise be spent on our schools, hospitals and other public services. The current Government is now tasked with clearing up the mess of that legacy.
Any tax rise is unwelcome, however the situation I have just outlined leaves us with an urgent need to raise funds to address the budget deficit. It is worth noting that the Institute for Fiscal Studies has shown that the top 10 per cent of earners pay 15 times more in VAT than the bottom 10 per cent. This is partly because those on lower incomes spend a greater proportion of their outgoings on goods such as food, children’s clothes, mortgage payments and rent, gas and electricity, which are either exempt from tax or subject to a reduced rate.
The key Liberal Democrat policy of raising the level of the untaxed personal allowance, which is included in this budget, will lift 850,000 of the lowest paid people out of income tax altogether – a measure which the Labour Party has consistently opposed.
For the past 13 years while Labour has been in Government, pensions have decreased in real terms even as the country has become more prosperous – this Budget has finally restored the link between pensions and earnings.
Where Labour’s proposed rise in National Insurance Contributions (NIC) would have raised £6 billion, raising the level of VAT will raise £13 billion, and so it is wrong to suggest that the NIC rise would be a viable alternative to the VAT rise as it would raise less than half the amount of money.
During my election campaign I promised to fight for fairer politics, better education resources for the poorest pupils, a greener economy and fairer taxes, and I am delivering on those promises. The Government has announced a wide-ranging programme of political reform, a Green Investment Bank, extra money to support the poorest pupils, income tax cuts for the low paid by raising the threshold, and a rise in capital gains tax.
The level of VAT was not mentioned in any of my campaign literature. At the hustings events I made it very clear that the drastic financial situation would mean incredibly difficult decisions whichever party formed the government, and that a VAT rise could not be ruled out. Indeed, in the televised Chancellors’ debate, the spokespeople for all of the three main parties, including Labour’s Chancellor Alistair Darling, refused to rule out a rise in VAT. You may remember when the Government opted to temporarily reduce VAT to 15% in 2009, Alistair Darling admitted that VAT may later have to rise above 17.5% to pay for this.
Labour’s election manifesto pledged to make £44 billion of cuts to public spending over four years, however I have yet to hear from any Labour MP at Westminster about where those budget cuts would fall. As you are a Labour Party Finance Spokesperson, I wonder if you would enlighten the public about where Labour’s planned £44 billion of cuts would be made, in the interests of openness and transparency.
Jo Swinson MP