Alexander: VAT increase unavoidable
Published 23/06/2010 | 04:02
A senior Liberal Democrat minister has defended as "unavoidable" a rise in VAT to 20% announced in Tuesday's Budget after it exposed strains in the coalition with the Conservatives.
Treasury Chief Secretary Danny Alexander said the move - which his party vigorously opposed in the general election campaign - was the only alternative to still deeper spending cuts.
Chancellor George Osborne announced the hike as part of what he said was a "tough but fair" emergency package of tax increases and spending cuts on a scale unseen in decades.
A massive £11 billion benefits squeeze was also included in a harsh austerity package he said would clear the structural deficit by the time of the next general election in 2015. More pain will follow in the autumn spending review when Government departments whose budgets are not ring-fenced face cuts in the order of 25%, he warned.
He sought to soften the blow by restoring the state pension link to earnings from next year, raising income tax allowances for basic rate payers and a £2 billion boost for poor families.
However the VAT measure sparked deep unease among Liberal Democrats as Labour accused them of acting as "fig leaves" for a Budget that would still hit the most vulnerable hardest.
Colchester MP Bob Russell issued a stark warning to the leadership, declaring: "I can't see myself at the moment voting for the Budget." He said he had told voters less than 50 days ago that he was opposed to a VAT rise - which was predicted as a potential "Tory Bombshell" in a major party poster campaign.
Mr Alexander, who was applauded when he addressed a meeting of the party's MPs after the statement, denied misleading voters.
"What we actually said in the election was that we would seek to reduce the deficit through spending but only if, on the grounds of fairness, we needed additional tax rises would we seek one. And on VAT, we have a choice: if the structural deficit is £12 billion larger than the previous government told us - do we fill that with yet more spending cuts or do we choose a tax measure.
"We want to see income tax thresholds rise to help with incentives to work. That means VAT was the unavoidable choice," he said.