In Defence of Liberty

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VAT Attack

Labour have released a campaign poster, in support of their candidates for the European and local elections. (Photo: Huffington Post/Labour)

Labour have released a campaign poster, in support of their candidates for the European and local elections. (Edited: Huffington Post/Labour Party)

The Labour party’s new election campaign poster focuses on the rise in VAT, declaring that David Cameron and Nick Clegg are “two peas in a pod”.  When asked about the poster on LBC radio, Shadow Chancellor Ed Balls said that:

When I saw it I think I had the same reaction as you, which I think I might have chosen a different picture had I been drawing up that ad.

There are numerous problems with this campaign poster.

Firstly, the underlying message is that the Prime Minister and Deputy Prime Minister are “two peas in a pod”, which is wildly inconsistent with their election broadcast ‘The Un-credible Shrinking Man’, which depicted Clegg as a man who literally shrank before Cameron.

Secondly, the poster depicts what a Labour spokesperson calls “a representation of an average shopping basket”, where many of the items – such as all the fresh fruit and vegetables – are exempt from VAT.  This perception of VAT has been used before: the party’s European election broadcast showed a woman picking up a tomato, as the doom-laden narrator said: “[David Cameron’s] increase in VAT alone has cost the average family £450, by putting the price of dozens of everyday essentials.”

Thirdly, the figure itself of £450 “extra VAT on your shopping bill” is problematic. It is not clear to whom this amount applies, and over what period. When challenged on Sunday Politics, Labour’s election strategist Douglas Alexander said it was “not an annualised figure”. In plain contradiction, Mr Alexander protested earlier in the same interview:

So you’re denying that £450 extra has been paid by average families on their shopping bills during this year?

(Video: sunny leoon)

The Shadow Chancellor certainly thinks it is annualised. Back in 2011, Mr Balls wrote: “But is it worth more than the £450 he’s taking off families in VAT, let alone tax credit and child benefit cuts?” The Cameron character in ‘The Un-credible Shrinking Man’ wanted take “£450 per family per year” in VAT.

Whilst the Shadow Chancellor claimed the £450 number was sourced from the Institute of Fiscal Studies, Full Fact notes it was actually an extrapolation of Treasury estimates. Despite the poster saying there was “£450 extra VAT on your shopping bill”, this average estimate can only plausibly be applied to ‘couples with children’. Moreover, this is a mean average, and so may be skewed by wealthier couples buying costlier items. For instance, a new Jaguar XFR incurs about £1,360 extra VAT since the rate rise. Overall, Full Fact concludes “only those in the two highest income deciles would actually see such a rise.”

Fourthly, of the three items that are subject to VAT in the poster, Labour has considered increasing the prices of two of them. A sin tax on soft drinks has only been recently ruled out by Shadow Health Minister Luciana Berger, after one was backed by her predecessor. Labour currently supports a minimum price on alcohol.

Whether through ignorance or incompetence, Labour began a poor campaign for an incoming governing party.

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This entry was posted on May 17, 2014 by in National Politics and tagged , , .
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