Ed Balls suggests Budget tax cut options

 

Shadow chancellor Ed Balls: "A VAT cut is the fastest and fairest way to do a temporary boost to demand to get confidence moving"

Labour shadow chancellor Ed Balls has called for "decisive action ... to boost growth", offering suggestions for tax cuts in next month's Budget.

Mr Balls' ideas include a VAT cut, a 3p income tax cut for a year, bringing forward the planned personal allowance rise to £10,000 and higher tax credits.

No tax cut could mean "a permanent dent in our nation's prosperity", he said.

The Conservatives said excessive borrowing and debt under Labour had led to the current financial mess.

Mr Balls told BBC One's The Andrew Marr Show the current austerity measures were "self defeating" and had left Chancellor George Osborne claiming he was "trapped by the credit rating agencies".

The shadow chancellor said he favoured a cut in VAT - which is a sales tax rather than a tax on income - because it would be the "fastest and fairest" way of boosting the economy.

"We've got to get growth back in the economy," he told the programme.

Writing in the Sunday Times, Mr Balls said: "Some people may be surprised to see Labour prioritising tax cuts. But in a crisis there is a premium on what works effectively and quickly to get our economy moving."

He said that such a cut should be funded by borrowing, not more spending cuts.

He claimed it was "absurd" to argue that the £12bn cost of reversing the government's 2.5% VAT rise was unaffordable, when borrowing was £158bn higher than planned because of slower growth and higher unemployment than had been forecast.

"Such a tax cut now would boost confidence, help families feeling the squeeze and help get our economy moving again."

He added: "Without that decisive action in the Budget to boost growth, I fear we are in for a lost decade of slow growth and high unemployment which will leave a permanent dent in our nation's prosperity."

'Menu of options'

As well as Mr Balls' proposed VAT cut, "in an attempt to put pressure on the chancellor ahead of next month's Budget, he also sets out an alternative menu of options which he thinks might appeal to some Conservative and Lib Dem backbenchers", says BBC political correspondent Iain Watson.

"If George Osborne can't bring himself to reverse his VAT mistake, he has other options," Mr Balls wrote.

Michael Fallon: 'Mr Balls is the man who racked those debts up in the first place and now wants us to borrow even more'

"For the same amount of money, he could cut the basic rate of income tax by 3p for a year. Or raise the income tax personal allowance to over £10,000. Or increase tax credits for almost six million working people by around £2,000.

"It would be better to cut VAT now - it's fairer and quicker and would help pensioners and others who don't pay income tax. But any substantial tax cuts to help households and stimulate the economy would be better than doing nothing."

Conservative deputy chairman Michael Fallon told BBC One's Sunday Politics that Mr Balls had not learned "from his time as Gordon Brown's right-hand man".

He said that Labour had built up the debts which the coalition government was now dealing with and all tax cuts had to be funded or there would be "billions of pounds of more borrowing and more debt".

Mr Fallon said Mr Balls' suggestion would put the UK's triple A credit rating at risk and the past week had seen international and national organisations back the coalition's economic strategy.

He also said that the Conservatives were still the tax cutting party, pointing out that Council Tax had been frozen and personal tax thresholds raised, so were doing what they could given the current economic situation.

 

More on This Story

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    -4

    Comment number 599.

    Labour cannot continue to be blamed for the mess the country is in at the present time. Mr Cameon has promised changes which will improve the economic situaition and we have seen none so far. The private sector did not offer the extra jobs promised and the banks continue to pay out huge bonuses. Cutting tax might be the answer but Mr Osborne has a plan or so he says. We need action now!!

  • rate this
    +6

    Comment number 537.

    You can't borrow your way out of debt. You can't borrow your way out of recession. Those countries which haven't tightened spending - France, Greece, even the USA - have had their credit rating downgraded and now spend more on interest on those debts.

    Ed Balls has learned nothing from his mistakes in government. He's a fool trapped in socialist dogma. Ignore him.

  • rate this
    +11

    Comment number 491.

    Tax cuts will bring more money out into the economy. Even if freed money initally goes towards paying off debt, reducing debt is part of process of returning money to the economy, and frees up dispoable income earlier

    For the poor, tax cuts are key as they aren't even able to meet the essential costs presenrtly. For middle-classes, dispoable incomes have shrunk. Spare cash is in short supply!

  • rate this
    +13

    Comment number 439.

    As a nation we need to consume less and produce more.

    Just keeping on borrowing money to buy cheap foreign imported goods is no way to run a successful economy in the 21st century.

    Ed Balls really should know this.

  • rate this
    +12

    Comment number 235.

    BBC today -House prices dropped 25% since 2007 (And wait until the interest rates go up and the real slump occurs)
    Nearly 3m unemployed (Officially)
    Wages depressed
    Diesel highest price ever (in a world slump)
    A debt as bad as Greece
    £ down approx 30% since 2007

    Where do we get the money from for tax breaks or to spend our way out of recession

    Labour got us into this. They cannot get us out.

 

Comments 5 of 13

 

More Politics stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.