VAT rise will hit families, warns Miliband

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. “At midnight VAT goes up, hitting people’s living standards, small businesses and jobs. “The VAT rise is the most visible example of what we mean when we say the government is going too far and too fast, because it’s clear that it will slow growth and hit jobs.” He will say the average family will have to find an extra £7.50 “each and every week”, adding up to an extra £389 a year.

Mr Miliband will say the figures are from a Liberal Democrat poster from May’s general election campaign and he will use them to highlight the “broken promises” of Deputy Prime Minister Nick Clegg and the wider government. While the Oldham East and Saddleworth seat is seen as a three-way contest, Mr Miliband will say there is “only a two-way fight for the direction of the country” now the Lib Dems are in coalition with the Tories. Lib Dems will also step up their campaign in Oldham East and Saddleworth with six ministers visiting this week, including Mr Clegg for the second time. Lib Dem candidate Elwyn Watkins lost the seat by only 103 votes last May, but the result was declared void by an election court which found winning Labour candidate Phil Woolas had lied about him in election literature.

BBC political correspondent Laura Kuenssberg said the new political year had started on familiar ground, with the coalition government and Labour locked in an argument over the economy. She said their policies would be tested at this month’s by-election. “Some voters will have a chance to judge whose economic solutions are more convincing as by-election campaigning in Oldham hots up,” she said. “The vote, in 10 days’ time, will be an early test for the coalition and for Ed Miliband – the government and his leadership, both less than a year old.” Meanwhile, the British Retail Consortium says the looming VAT rise gave a “modest boost” to sales of “big-ticket” goods in December and retailers were discounting to make up for missed sales during the snow. “That may mean the impact of the VAT rise is lost among discounts, but ultimately retailers can’t absorb the cost indefinitely,” said spokesman Richard Lim. “It will push inflation up and, along with National Insurance rises and public sector job losses, harm sales as the year continues. “But, we do accept the VAT rise, with substantial public spending cuts, is necessary as part of the government’s package to tackle the deficit.” – BBC