May Promises No Increase in VAT, Hints at Other Tax Rises

  • Cutting taxes on working familes is ‘my intention,’ May says
  • Premier defers offering specifics until publishing platform

EU Throws Down Brexit Gauntlet as Talks Edge Closer

U.K. Prime Minister Theresa May pledged there will be no increase in Value Added Tax after the June 8 general election, but suggested she will ditch her Conservative Party’s promise not to raise other taxes when it publishes its program for government.

Asked if she will stick to a pledge not to raise income tax, VAT or national insurance -- made by her predecessor David Cameron before he was elected in 2015 -- May said she will not make “specific proposals” before the vote. Chancellor of the Exchequer Philip Hammond said on April 21 that he had been “constrained” by Cameron’s promise.

“We have no plans to increase the level of tax but I’m also very clear we don’t want to make specific proposals on taxes unless I’m absolutely sure that I can deliver on those,” May told BBC’s “Andrew Marr Show” on Sunday. “It would be my intention as a Conservative prime minister and a Conservative government to reduce taxes on working families.”

In a later interview on Sunday, with ITV’s Robert Peston, she backed down from her position on specific proposals, saying she will not increase VAT, a sales tax.

May is seeking to widen her Conservative Party’s majority and win her own mandate unfettered by Cameron’s pledges on tax, immigration, welfare and education as she steers Britain’s divorce from the European Union. New opinion polls show her party remains on course to win a bigger majority in the June general election.

Pension Pledge

The prime minister said the Tories will vary another of Cameron’s pledges, on increasing state pension payments to retirees, by introducing a change to the promise that they should be increased by whichever is greatest of inflation, average earnings or 2.5 percent.

“Under a Conservative government, the state pension will go up every year in the next parliament,” May said on the BBC. “Exactly how we calculate that will be for the manifesto.”

John McDonnell, economy spokesman for the opposition Labour Party, ruled out a VAT increase during an interview on Peston’s show and said his party would increase taxes for the rich if it wins power.

“We will end the tax giveaways to corporations and the rich,” he said on ITV. “There will be no increases in income tax for middle and low earners.”

While a series of overnight polls showed a narrowing of the Conservative lead over Labour -- from 16 percentage points to 13 points, according to YouGov Plc -- May’s party remains comfortably ahead. Tim Farron, leader of the Liberal Democrats, argued that this meant voters should back his party in order to restrain her. 

‘Colossal Coronation’

“The prime minister is heading for a colossal coronation,” Farron said on the BBC. “She expects the British people to turn up in their Sunday best and wave the flag. Britain desperately needs a strong opposition.”

Farron is trying to position the Liberal Democrats as the party of those who oppose leaving the European Union, warning that the prime minister is heading for “the cliff edge of a hard Brexit” and arguing that the outcome of exit negotiations should be the subject of a second referendum. 

May on Sunday insisted she would get a good deal, adding that she thought it was realistic to negotiate a free trade deal with the EU alongside the withdrawal talks. “We’re in a different position from other countries,” she told ITV. “It’s not like we’re a third country who’s starting negotiations with them. We’re starting from an entirely different point.”

Brexit Takes Shape: What We Learned From 27 European Leaders

While the prime minister argues that the election is about giving her a mandate for Brexit, she is also starting to set out domestic priorities. On Sunday, she pledged new restrictions on company takeovers as part of a plan to protect workers’ pensions from “unscrupulous” bosses. Authorities will get the power to block such deals and launch criminal prosecutions of company bosses who put pension programs at risk.

Her focus on protecting pensions follows a public outcry in Britain over the collapse of the retail chain BHS after Philip Green, majority owner of clothier Arcadia Group, sold the company. In February, he agreed to pay as much as 363 million pounds ($470 million) to compensate 19,000 former workers of the department store chain after months of haggling with the country’s Pensions Regulator.

Under May’s plan, any company pursuing a merger or acquisition valued over a set amount -– or with more than a prescribed number of employees -– would have to notify the Pensions Regulator, which could then apply clearance conditions. In extreme cases, where there was no credible plan or willingness to ensure the solvency of the scheme, the pension scheme or Pensions Regulator could be given new powers to stand in the way of takeovers.

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