VAT rise puts jobs at risk

The 2.5% hike in VAT which comes into effect at midnight tonight will cost families almost £400 a year and put up to 250,000 jobs at risk, Labour leader Ed Miliband warned today. He accused both of the parties in the ruling coalition of breaking election promises on tax, reminding voters that Liberal Democrat leader Nick Clegg campaigned against a “Tory VAT bombshell”, while Conservatives promoted a “fuel duty stabiliser” to reduce levies on petrol when prices are high at the pump. The increase to 20% will force up the cost not only of a tank of petrol, but also of regular purchases like a mobile phone call, cup of coffee or DVD, he said. But he was accused of “opportunism” by Chancellor George Osborne, who challenged him to explain what he would cut to make up for the revenue he would lose by scrapping the planned VAT increase. – Independent

The rate of Value Added Tax rose by 2.5 percentage points at midnight, from 17.5 per cent to 20 per cent – an attempt by the Coalition to reduce the deficit. But analysts believe many gyms, mobile phone companies, restaurants and shops will raise their prices by between 5 per cent and 8 per cent, or possibly more. To recoup the escalating cost of petrol, energy, cotton and other key commodities, they are expected to use the tax change to obscure far larger price increases. This could add far more to a family’s annual expenditure than previously expected. Ed Miliband, the Labour leader, said yesterday that the VAT rise would cost the average family almost £400 a year and put 250,000 jobs at risk. Campaigning in the Oldham East and Saddleworth by-election, Mr Miliband cited a Liberal Democrat poster from last year’s general election, that warned a “Tory VAT bombshell” would cost households £7.50 a week. – The Telegraph

The government claims that the alternative to today’s VAT rise is bigger spending cuts. But that isn’t true. Yes, the coalition government needed to set out a credible framework for stabilising the national debt, but its decision to tighten the screws so far and so fast was a political choice. It wouldn’t surprise me if Osborne was planning pre-election tax cuts for 2014. Instead of raising VAT and national insurance this year, the government could introduce taxes on carbon and financial transactions next year. And it should levy a tax on land values. Since all the land in Britain is worth some £5 trillion, an annual levy of 1% could raise £50bn a year – without depressing economic activity, because land is in fixed supply: central London can’t be spirited away to a tax haven. As well as preventing property bubbles (and busts), a land tax would be fair. A mere 160,000 people (mostly hereditary landowners) own more than two-thirds of Britain – and the value of that land increases not through their own striving, but through that of others. – The Guardian (more…)

VAT increase will hit hard

The planned rise in VAT is the “wrong tax, at the wrong time”, Labour leader Ed Miliband is to warn. Speaking ahead of Tuesday’s VAT increase from 17.5% to 20%, Mr Miliband will claim it will cost the average family £7.50 a week. He will say the rise, considered but rejected by Labour, will hit “living standards, small businesses and jobs”. But the Conservatives say Labour’s plans for the economy would cost businesses billions of pounds. The government hopes the VAT increase will raise £13bn and insists it is necessary to help reduce the UK’s deficit. The Labour leader is set to issue his warning on Monday during a visit to the constituency of Oldham East and Saddleworth, where a by-election is to take place on 13 January. He will say the VAT rise on most goods and services will hinder economic growth, cost thousands of jobs and make it even harder for families to make ends meet when they are already feeling squeezed. “Today we start to see the Tory-led agenda move from Downing Street to your street,” Mr Miliband will warn. – BBC

The shameless Chancellor jetted off on a luxury skiing holiday – leaving Britain to suffer the backlash of his vicious policies. He went on the piste as struggling families faced huge rises in fuel duties, rail fares and VAT. That’s not to mention benefit reductions, pay cuts, job losses and the rise in university tuition fees. Last night furious union chiefs said the top Tory’s latest jaunt made a mockery of his claim that “we’re all in this together”. Millionaire Mr Osborne is staying with wife Frances and their two children at a trendy boutique hotel in the Swiss resort of Klosters. They have enjoyed almost a week of fun on the slopes – just before the Coalition’s stinging 2.5% VAT hike hits the high street. – The Mirror

Hundreds of poor families and young people may miss out on emergency welfare assistance for essential items such as beds for children, cookers and fridges because of this week’s VAT increase, charities warn. People in urgent need of specific household items – for instance those who have had to move swiftly to escape domestic violence, or who have lost their belongings in a house fire – can apply to charitable organisations for small, quickly delivered sums to meet their most pressing needs when they have exhausted state help. But charities warned of a “perfect storm” as the rise in the VAT rate from 17.5% to 20% on Tuesday increases prices and cuts the number of grants awarding bodies can make – at a time when applications are rising and funds dwindling because the interest earned on charities’ investments has plummeted. – Guardian

Campaign kicks on in Oldham East

Campaigning will get under way in earnest this week in the Oldham East and Saddleworth by-election, the first big test of public opinion since the creation of the coalition government. Both Nick Clegg and Ed Miliband will pay their second visits to the constituency, which Labour won last year with a majority of just 103 over the Liberal Democrats. David Cameron, who has faced accusations he secretly wants his coalition partners to win the contest on 13 January, is also due to visit this week. In a sign of Liberal Democrat anxiety about their prospects, their former leader, Charles Kennedy, deputy leader, Simon Hughes, president, Tim Farron, and several ministers will also bang the drum for the party. Mr Miliband will say during a visit today: “The battle in Oldham and across the country is about Labour and this Conservative-led government. “It may be a three-way fight for Oldham East and Saddleworth between Labour, the Liberal Democrats and the Tories. But it’s only a two-way fight about the direction for the country.” – Independent (more…)

Tory revolt over Oldham & Saddleworth

David Cameron faced a revolt from rebel Tory MPs last night over claims that he is secretly backing so-called ‘purple plotters’ who want a merger with the Liberal Democrats. Leading Conservative MP Mark Pritchard challenged the Prime Minister to make it clear that he will not allow Tory ‘zealots’ to form a new ‘Frankenstein’ party with Nick Clegg’s Lib Dems at any time, locally or nationally. Unless the plan is stopped in its tracks, the Tory faithful could refuse to campaign for the party in future elections, warned Mr Pritchard, secretary of the influential backbench Conservative 1922 Committee. His threat comes after a growing number of senior Tories, including former Prime Minister Sir John Major, have promoted the idea of maintaining the Tory-Lib Dem alliance after the next Election. – Daily Mail

I know that we are into a new and different sort of politics, what with two parties forming the government and all that, but the bigger of those two parties really is taking the mick in the Oldham East and Saddleworth by-election. Both parties deserve to be punished as a result. It takes a fair bit for me to feel sorry for a Tory, but it is hard not to feel some sympathy with the Tory candidate, Kashif Ali, who has effectively been thrown to the scavenging Lib Dem wolves. From David Cameron down, the message is clear – we will say we are pulling out the stops for poor old Kashif, but we’re not really, and for heaven’s sake don’t do anything that looks remotely like an organised campaign. International development minister Andrew Mitchell seems to have gone further, saying they will do all they can to help the Lib Dems. – Alastair Campbell

Ed’s 100 days

Failure is half-acknowledged in the setting up of a sweeping policy review. But before that process is complete there must be an interim reckoning with New Labour’s legacy. The party needs to know what it is campaigning to preserve as well as what to change. Mr Miliband will himself spend his 100th day in the job campaigning to help Labour retain the marginal seat of Oldham and Saddleworth in a byelection. Inevitably, the contest is being held up as a test of progress against the coalition. Labour’s eviction from power is too recent to expect the party to start looking like a fresh alternative government. That is a long-haul project. But it starts with a clear account of what was right and what went wrong under New Labour. It requires also an account of the leader’s governing principles. After 100 days, Ed Miliband has not yet properly explained to the country as a whole who he is and what he believes. He shouldn’t waste any more time. – Observer

All in this together

Chancellor George Osborne, who defied austerity Britain by taking a luxury break at Prince Charles’s favourite ski resort, Klosters. Ironically, it was Mr Osborne who coined the phrase ‘we’re all in this together’ when calling for massive cuts to get the country out of the red at the 2009 Tory Party Conference. Meanwhile tycoon MP Zac Goldsmith was reportedly sunning himself at a £8,000-a-week villa in the Caribbean over the New Year – in contrast to David Cameron, who scrapped plans for an expensive holiday in Thailand for fear of sending the wrong message to voters. – Daily Mail

Cameron vs Tory right

Conservative backbenchers are preparing to ambush the controversial European Union Bill which goes before the Commons when MPs return from their Christmas break. Eurosceptic Tories will table radical changes to the legislation, which they claim does not deliver on its promise of a referendum on future transfers of powers to the European Union. If the changes strengthening the legislation are not accepted by the Government, some Conservatives said they might even vote down the entire Bill. Last night Labour sources signalled that Ed Miliband, the Labour leader, will order his MPs to oppose the legislation too. The prospect of a pincer movement of Labour MPs and Tory rebels is acutely worrying for Mr Cameron, whose Coalition majority of 76 would be overturned if just over half that number of Tories joined forces with Labour. – Telegraph

More broken NHS promises from Lansley

Promises to improve mental health care for millions of people a year are at risk of being broken as the Government scraps plans to invest money in high-quality research. The coalition’s new mental health strategy, expected to be published shortly, fails to recognise the importance of research in reducing the huge burden of mental illness. This flies in the face of its own promises and of compelling evidence, experts warn. Mental illness is the country’s leading cause of personal suffering, economic loss and social problems, costing England alone more than £105bn in 2009. Those with mental health problems are more likely to get cancer or have a heart attack, for reasons that are little understood. Less than £75m of public money is spent each year on relevant research, a fraction of the sums spent on cancer and heart disease. – Independent