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How should the Conservatives counter Labour's 'Tories will increase VAT and cut inheritance tax' attack?

Picture 15  A Tory poster from last year.

Labour's fightback strategy becomes clearer by the day.

We already have seen Team Brown throw the kitchen sink at us for sticking with our inheritance tax pledge. Policy Exchange's Neil O'Brien recommended that the party drop the pledge to neutralise the 'Tories-are-friends-of-the-rich' message. I was minded to agree with Neil but the party leadership felt that rowing back on the pledge would send the wrong message. After the Daily Mail's anger at the decision not to hold a post-Lisbon referendum, Cameron and Osborne are now even more determined to stick with the commitments to cut IHT and introduce a tax break for married couples.

The second part of the Labour attack is now clear. The Sunday Telegraph's Patrick Hennessy scooped it this morning

"Labour will make keeping VAT at 17.5 per cent a main election "pledge", with ministers constantly claiming that the Conservatives would, by contrast, raise the rate to 20 per cent within weeks of coming to power."

Ed Balls deployed the attack on Marr this morning.

So the Labour tax attack is clear: The Tories will increase VAT (a regressive tax) to fund inheritance tax cuts (for the wealthy).

The truth, of course, is that any VAT increase will be used to start paying off Labour's deficit and the inheritance tax cut won't be delivered until year three or four of any Conservative government but the Tories will probably need more than that to counter Labour's message.

My own thoughts are these:

  1. Admit that VAT will increase to 20%. I think voters are ready for honesty and the markets need reassuring.
  2. Make a pledge that tax rises will be time-limited and will expire in, say, 2014 after the deficit has been brought under control.
  3. To counter the regressiveness of the VAT hike promise special protection for the very poorest including pensioners and those in the public sector on low wages.
  4. Promise that most of the deficit reduction package will be from spending cuts. That's what voters say they want but the Tories haven't yet come close to setting out what the spending cuts will look like.  A lack of definition leaves the party more vulnerable to Labour attacks.
  5. Most importantly of all, launch a growth manifesto - entitled something like A bigger economy will eat the deficit.  It should be full of the sort of measures I discussed on Wednesday. The Tories must own growth by the time of the General Election.

Tim Montgomerie

PS Does anyone have the image of Norman Lamont as Vatman from Labour's 1992 attack on him?


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