Cable fears Tory VAT hike

By Alex Stevenson

The Conservatives will raise value-added tax to as much as 25 per cent within a few months of taking power, Vince Cable has predicted.

Speaking at a fringe event in Bournemouth, where the Liberal Democrats are holding their autumn party conference, Dr Cable said such a move would have “very painful consequences” but could have a big impact.

“I think I would predict within a few months they would have increased VAT to 22.5 to 25 per cent,” Dr Cable said.

“Every per cent you raise brings in £5 billion. That takes you a long way to getting rid of your deficit.”

The Lib Dems’ Treasury spokesman said the Conservatives had implemented a similar measure in 1981 – and escaped politically because of the Falklands conflict.

While a VAT hike was “one way” of solving the public spending deficit problem, Dr Cable insisted the Lib Dems would not opt for such a blanket proposal.

“This is not a time to embark upon a large programme of cuts. we’re in a totally different place to where the Tories are,” he said.

He identified public sector pensions and public sector pay as areas where difficult choices would have to be made.

“It would be foolish to have a total freeze on public sector pay,” Dr Cable added. “What is less ridiculous is to set your objective as not increasing the pay budget as a whole.”

He added: “I’m sorry to upset you just before dinner, but I believe I have a duty – to the party – to spell out these issues and make sure they’re properly discussed.”

Dr Cable will deliver his keynote speech to the Lib Dems’ conference tomorrow.