Lib Dems squirm over VAT opposition

By Alex Stevenson

Liberal Democrat opposition to an increase in value added tax was political point-scoring, business secretary Vince Cable has claimed.

The former deputy leader of the party, who resigned his post to enter the coalition government, made the suggestion as he defended the emergency Budget’s planned hike in VAT from 17.5% to 20%.

His comments came amid growing disquiet from Lib Dem backbenchers which has resulted in behind-the-scenes talks with Labour MPs, according to one report.

One Lib Dem MP told the Independent on Sunday newspaper that members of the junior coalition party had “talked tactics” with Labour MPs in a bid to launch “surgical strikes” against the Budget.

Dr Cable told BBC1’s The Andrew Marr Show that his party’s ‘VAT bombshell’ poster, a major campaigning point of the general election, was not to be taken seriously after polling day.

“We were scoring a point against the Conservatives,” he said.

“That was in the election, we’ve now moved past the election. We’re working with the Conservatives. We’ve reconciled our differences.”

His comments are likely to fuel rather than dampen the frustration of Lib Dem backbenchers.

Six Lib Dem MPs met Labour counterparts, the Independent on Sunday reported, for private talks.

Meanwhile four Lib Dem MPs, including Andrew George, have put their names to an amendment calling for a review of the VAT hike’s impact on businesses, charities and households.

“If you sincerely believe something is wrong, you should use all the forces available to prevent it,” one MP told the IoS.

“The feeling that this measure will hit the poorest more than anyone else is shared right across the party divide. I am not sure the government will drop it, but we must at least try to make them rethink.”

Dr Cable pointed out the Institute of Fiscal Studies had said the way the VAT rise was being implemented was, overall, “slightly progressive”.

He cited the decision to continue Labour’s policy of removing some tax relief for pensions as one of the measures which made the Budget fairer.

“If you look at the package as a whole that makes the balance much better and much more equitable,” he added.

Chancellor George Osborne is unlikely to compromise on the VAT hike, which as shadow chancellor Alistair Darling conceded last week represents one of the most effective means of increasing revenue streams into Treasury coffers.