Eastleigh’s MP, Chris Huhne, has defended the government’s plans to raise VAT to 20 % while speaking in Parliament during the budget debate.
Facing criticism from the Labour benches the Energy secretary denied that his party has performed a U turn on VAT and spending cuts claiming the facts had changed since the election*
During the election campaign the Lib Dem’s ran a ‘Bombshell’ poster which accurately predicted that the Conservatives would have to raise VAT by 3% to pay for their proposals and this would cost the average family £389 a more in tax.
Huhne’s boss, Nick Clegg, said at the time:
“We will not have to raise VAT to deliver our promises…Let me repeat that: Our plans do not require a rise in VAT. Tory plans do”
Although the Lib Dems described VAT as a ‘regressive tax’ -which hits the poorest the hardest – Mr Huhne argued that any potential regressive effects were ameliorated by the wide range of exemptions and tried to draw upon the latest report from the Institute of Fiscal Studies which he claimed showed that VAT was not regressive at all, even though in the introduction to the report the author uses the word ‘regressive’ to describe it.
Mr Huhne said that data in the report showed that the tax rise would not affect the expenditure of the poorest 10% of the population unduly, however this was countered by Labour MP Rachel Reeves who revealed that the report also showed that the rise in VAT would result in the same group of people to experience a 2.6% drop in income.
“Is that regressive or progressive?” she asked Mr Huhne pointedly.
Mr Huhne insisted that both immediate action on spending cuts and tax rises were now needed to avert the possibility of a ‘Greek style’ crisis here and that no one knew prior to the election just how bad the International sovereign debt situation was.
He quoted the economist Keynes saying ‘When the facts change, I change my mind’ which lead another labour MP, Chris Bryant, to observe:
‘I can fully understand why he (Chris Huhne) is seeking to justify himself – he has a lot of voters he has to explain himself away to.’
*True, after the election it emerged the deficit was about £6 billion LESS than previously forecast.
Do you think Chris Huhne is going to come to the rescue of the economy with a timely ‘Green Bubble’ – or is he just another Lib Dem puppet dancing to the Tory tune?