Lib Dems call for VAT-funded tax cuts
THE Liberal Democrats are campaigning for a tax cut, after calculating that the Treasury will pocket almost £40 billion in extra VAT receipts due to soaring inflation.
Party analysis of Office for Budget Responsibility figures shows that Chancellor Rishi Sunak will receive a VAT windfall of £38.6 billion over the next four years, with working households facing a £428 higher VAT tax bill in 2022-23 alone due to rising shop prices.
Lib Dem leader Sir Ed Davey plans to put the cost-of-living crisis “at the heart” of the party’s local elections campaign, officials said.
The Lib Dems are calling for an emergency cut to VAT, slashing the top rate from 20% to 17.5% for one year, a move they predict would save families an average of around £600. They say the plans would give a boost to struggling high street businesses by encouraging spending, and help keep inflation under control by reducing prices in the shops.
Citing calculations by think tank the Resolution Foundation, the party said the rising VAT bill comes on top of Conservative manifesto-busting tax increases by the Chancellor, with the income tax threshold frozen and National Insurance set to rise by 1.25 percentage points today.
The fiscal measures will leave a typical family £535 a year worse off, even before the extra VAT pinch is felt, according to the Lib Dems.
Speaking ahead of launching the party’s local election campaign in south London today, Sir Ed said: “Families are facing soaring energy bills and desperately need a tax cut to help them make ends meet. But instead of helping, the Conservatives are breaking their promises by raising taxes again and again. These elections are an opportunity to send a message to this Conservative Government that they can’t afford to take people for granted any longer.”
He added: “We will fight for a fair deal that puts money into the pockets of struggling families through an emergency tax cut.”
The Lib Dem local elections offer will include proposing a sewage tax on water companies to fund the clean-up of Britain’s rivers.
Meanwhile the Prime Minister has defended the decision to hike up national insurance for millions of workers, arguing that the manifesto-breaking rise is “necessary, fair and responsible”.
Although it increases today, from April 2023 onwards, the NI rate will decrease back to the 202122 level, with a new 1.25% health and social care levy legally introduced.
The UK Government predicts that the tax rise will raise £39 billion over the next three years to help reduce the Covid-induced NHS backlog and later reform adult social care for the long-term.
Boris Johnson said: “We must be there for our NHS in the same way that it is there for us.
“Covid led to the longest waiting lists we’ve ever seen, so we will deliver millions more scans, checks and operations in the biggest catch-up programme in the NHS’ history.”
The Conservative 2019 election manifesto, which helped Mr Johnson deliver a landslide majority, pledged “not to raise the rates of income tax, national insurance or VAT”.