The great VAT betrayal


The recent vote in Parliament on the Finance Bill offered the most compelling evidence yet of Labour’s failure to stand up to the Coalition Government and instead simply abandon their principles.

We’ve already seen Ed Miliband urging his MPs to cross picket lines and refuse to support the pensions’ strike, clearly at odds with the unions and many within his own party. But refusing to vote for Plaid Cymru’s amendment to reduce the VAT rate to 17.5% after senior Labour MPs had been calling for exactly that is simply unjustifiable and smacks of irresponsibility.

It is a matter of grave concern when petty party politics is prioritised ahead of delivering economic growth and jobs in this country.

After all, the VAT rate is one of the key issues facing the economy at present, and both Labour and Plaid have identified it as so. We have consistently argued that at its present rate of 20%, it is hitting struggling families and small businesses especially hard in the current economic climate, and is choking growth.

This is backed up by Shelter Cymru’s report which was published recently, which found that 21% of families in Wales have had to reduce spending on heating, while 28% have had to cut back on food, simply to meet rent and mortgage costs.

People with less disposable income are the worst affected by the high rate of VAT, simply because they pay a higher percentage of the little that they have, not on luxury items, but the essentials such as food and heating. VAT is also a major factor in the well above target inflation, and so a temporary cut would have relieved the financial pressure on many families as well as stimulate economic growth.

Labour seemingly agrees with us. The Shadow Chancellor Ed Balls has made this a key issue in recent weeks, claiming, in his own words, that ‘the economy has flatlined’ and that a temporary cut to VAT would ‘give the economy the jump start it desperately needs and help millions of families and pensioners’. And he’s right when he points out that more money in people’s pockets will increase consumer confidence and help the struggling retail sector. The Shadow Treasury Minister David Hanson was also in on the act, calling for a ‘temporary emergency VAT cut for everyone until the economy starts growing strongly again’.

Yet when it came to the crucial vote - their hypocrisy was exposed.

All but one Labour MP either voted against or abstained on the amendment that we had already put forward to temporarily reduce VAT to 17.5%.

So did they simply abandon their position? Or was all the talk of cutting VAT rates just hot air? Because either way, they again stood idly by and did nothing to oppose the Tory-led government’s economic agenda.

They did exactly the same last year when they publically opposed the hike to 20%, and then abstained when it came to vote.

The fact that they tabled their own amendment calling for exactly the same thing suggested that they were supportive, which therefore implies that they refused to support the measure simply because it was proposed by Plaid.

That is absolutely cynical. This was no mere technical amendment. To play party politics and go for cheap points scoring rather than stick to their beliefs on an issue of such crucial economic importance is highly irresponsible and shows complete contempt on their part.

What this has shown is that we need in the face of this Con-Dem government and their cuts-driven agenda are people who will be effective opposition and stand up for the vulnerable who are being disproportionally hit.

Sadly, Labour has shown that they are simply not up to the task.

Plaid has made it our duty to scrutinise and challenge it wherever we see the need to do so, and whenever possible, in order to make the changes that we believe in. Sadly, it should be of great concern to the people of Wales that others are incapable of defending the very same principles which they supposedly share.