Today has been one of predictable political sparring over the VAT increase. But, as one Tory MP said to me last night, the crucial question is how long people keep talking about it. If the public come to blame the VAT rise for every price rise they encounter—as Ed Miliband wants them to—then the coalition has a problem. But if the new VAT rise just becomes a fact of life then the coalition will pay a low political price for the rise. Indeed, if the VAT rise ends up helping provide money for an income tax cut later in the parliament then the coalition could actually benefit from it. (Note Osborne’s last answer to Evan Davis this morning.)
Alan Johnson, the shadow Chancellor, has not had a good day. His missteps gave the Tories, who were on the defensive following Ed Miliband’s strong showing yesterday, a chance to go on the attack.
One thing that surprises me is that the coalition haven’t taken the chance of this VAT rise to also simplify the VAT system, removing all of the exemptions except those on food, children clothes and newspapers and books which would have enabled it to raise even more revenue from this rise. For example, it is hard to see why helicopter charters should be subject to a zero percent rate of VAT.
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