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Miliband Says U.K. Borrowing to Rise If Labour Cuts VAT

April 30 (Bloomberg) -- The leader of the opposition Labour Party, Ed Miliband, said U.K. government borrowing would rise to fund a temporary cut in value-added tax if he was in power now.

Miliband told the BBC’s “World at One” radio program yesterday he did “not accept” that Labour’s policy, designed to stimulate consumer spending by reducing VAT, a levy on sales, from 20 percent, would mean borrowing more than the current Conservative-led coalition government. In an appearance on ITV’s “Daybreak” program today, Miliband said the policy would mean increased debt in the short term.

“Attempting a cut in VAT, as we’re proposing, would lead to a temporary rise in borrowing,” Miliband said. “The point I was making yesterday was that if you can get growth going, by cutting VAT, then over time you’ll see borrowing fall.”

With just two years to go until the next general election, Miliband is coming under pressure to set out his party’s policies and say whether he will stick to current spending plans. That issue will crystallize when Chancellor of the Exchequer George Osborne details cuts to government departments’ spending on June 26 for the 2015-16 fiscal year, the first after the election.

“Less than 24 hours after refusing 10 times to admit the truth, a weak Ed Miliband has finally been forced to come clean that he plans to increase borrowing,” Sajid Javid, the Tory economic secretary to the Treasury, said in an e-mailed statement. “More spending, more borrowing and more debt is exactly what got us into this mess in the first place. It’s the same old Labour.”

Poll Findings

A poll published today found a majority of the British public think Osborne’s economic strategy has failed and that it will be “time for a change” in 2015. The ComRes Ltd. survey for the Independent newspaper found 58 percent agree with Labour’s “time for a change” agenda, while 31 percent disagree. ComRes interviewed 1,001 voters by phone between April 26 and April 28. It didn’t specify a margin of error.

Deputy Prime Minister Nick Clegg, who leads the Liberal Democrats in the government, said today that health, schools and international aid should remain protected from cuts in spending, after a Financial Times report that some Cabinet ministers were campaigning for an end to safeguards on the national health service budget.

Defense Secretary Philip Hammond, Business Secretary Vince Cable, Justice Secretary Chris Grayling and Communities Secretary Eric Pickles are among those campaigning for the change, the FT said.

“I think we are right and I am certainly adamant about this that we should stick to those protections,” Clegg told “The World at One” today. “There are knock-on effects on those departments that aren’t protected.”

Clegg also said he would not agree to further cuts to the welfare budget unless the Tories agree to cut universal winter-fuel payments for wealthy pensioners.

To contact the reporter on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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