At yesterday's unveiling of the Labour Party manifesto, the Prime Minister repeatedly declined to give a promise not to raise VAT if they win the general election.The Labour manifesto does contain a clear promise not to increase the rate of income tax for basic or higher-rate earners.
So what does that really mean?
As Labour seems unwilling or unable to admit to deeper cuts in public expenditure, then the only conclusion is that it will raise tax by other means.
Some possible tax rises include:
- a continued freezing of income tax bands, so that hundreds of thousands more people will be dragged into paying higher taxes
- an increase VAT from 17.5 per cent during the next Parliament.
- a commitment to setting up a commission on funding social care raised the prospect of a "death tax" on people's estates.
- a plan to review the whole system of local government finances could pave the way for a local income tax to replace the council tax.
- further increases in National Insurance - the Government's plans to increase National Insurance from next April mean a worker earning £40,000 would pay £187 more tax.
After the 2001 election, Labour increased national insurance contributions after promising no increase in income tax. This year, the top rate of tax went up from 40p to 50p last week even though Labour pledged that, again, there would be no increase in income tax rates.
Unfortunately, with National Insurance now being seen by Labour as part of the overall tax system, I would expect that this is the area in which we would see rises during a five year Labour term.
As the Telegraph noted this morning, their promises on tax are simply not worth the paper that they are written on.
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