A weekly round up from last week’s Election Campaign

Date published: 05 May 2010

VAT Increase? This week the EU fuelled already increasing speculation that VAT hikes are just around the corner by confirming that the UK VAT rate was one of the lowest in the European Union. The UK’s standard VAT rate of 17.5% falls short of the EU average of 20%, providing plenty of scope for a possible increase in the near future to cope with the huge debt burden that the newly-elected government needs to address. Despite this announcement there was no mention of VAT in last night’s highly anticipated leaders' debate which addressed economic issues.

IFS Report Also this week the Institute for Fiscal Studies analysed the party Manifestos and demonstrated the tax rises and public sector spending cuts that will be required to achieve the parties’ commitments. According to their research the Liberal Democrats would need to raise an additional £760 in taxes per household each year to meet its plans, Labour £610 and the Conservatives £390. Not surprising then that the parties’ plans require public sector spending cuts of £47bn, £51bn and £64bn a year respectively. What is necessary is for the next government to layout a credible plan to address the deficit; the question is “How?”

With this question in mind, we hoped for the debate last night to shed some light on this issue. However last night's debate could have been mistaken for a repeat of one the earlier debates. Nothing new was released and the party leaders just sought to defend themselves in a last-ditch attempt to secure votes.

The Final Leaders' Debate The clear issue of concern during the debate was how to tackle the deficit. Brown faced attack from Cameron over his party’s planned National Insurance Contribution rises, and retaliated by drawing attention to the Conservative plans of cutting Child Tax Credits as well as cutting the Inheritance Tax. Clegg, positioned in the middle, took advantage of the bickering and tried to show how voting for the Liberal Democrats would offer an alternative and fairer choice.

In reference to industry and manufacturing, the Liberal Democrats reiterated their plans to get the banks lending and to invest in green infrastructure. Gordon Brown spoke of his party’s plans to create 400,000 jobs in low-carbon industries, and emphasised his plans to retain the Regional Development Agencies. Cameron spoke of his party’s plans to invest in innovation, creating scientists and entrepreneurs of the future, and also mentioned plans to create 200,000 apprenticeships should the May 6 result fall in favour of the Conservatives.