How Tories kept secret of 15% VAT hike

The Conservatives secretly agreed plans for a "massive" increase in value-added tax from 8 to 15 per cent almost a year before the 1979 general election, party papers from the period, seen by the Independent, show.

The charge that the Tories would double VAT on taking office was levelled during the election campaign by the Prime Minister, James Callaghan, and other leading Labour figures. It was denied both by Margaret Thatcher, the leader of the Opposition, and byGeoffrey Howe, the shadow Chancellor, in a campaign in which the impact on prices of the Conservative's declared plans to switch from direct to indirect taxation played a significant part.

Sir Geoffrey (now Lord Howe) declared: "We have absolutely no intention of doubling VAT." The allegation was depicted as one of Labour's "dirty dozen" lies in a Conservative press release.

But papers marked "secret" and circulated in numbered copies only show that proposals for a "massive" hike in VAT to 15 per cent or even 17.5 were canvassed in February 1978 by Lord Cockfield, a member of Sir Geoffrey's economic team.

On Sunday 11 June 1978, at a meeting at Sir Geoffrey's home in Fentiman Road, Lambeth, south London, agreement was reached in principle to raise VAT to 15 per cent. That was 11 months before the election that swept the Conservatives to power. Those present included Sir Keith Joseph, Nigel Lawson, Peter Rees, Lord Cockfield and Patrick Jenkin. The papers record: "It was agreed that the major changes in the tax structure should be made early on. Once VAT had been raised it could not be touched again withi n the first parliament".

The aim was to allow Sir Geoffrey to honour his repeated pledge to switch taxation from "pay-as-you-earn to pay-as-you-spend", allowing the big cuts in income tax which marked Sir Geoffrey's dramatic first budget six weeks after the Tories took office. He slashed the top rate from 83p in the pound to 60p, cut the standard rate by 3p and raised thresholds, covering much of the cost by raising VAT.

In his recent memoirs, Conflict of Loyalty, Lord Howe says of Labour's charge that the Tories planned to double VAT: "We had no difficulty denying it. For there was no prospect, on even the most gloomy of expectations, of our having to go beyond a rate of 15 per cent.

"Some critics afterwards thought it pedantically misleading to rest our case on the fact that twice 8 per cent (the then basic rate) was 16 and not 15 per cent. They also overlooked the fact that some goods (about 6 per cent of the basket) were already taxed at 12.5 per cent: the weighted average impact of the existing dual rate was 8.5 per cent. So our denial was more than technically correct." He dismissed the row as "part of the small change of election campaigning".

Lord Howe told the Independent last week: "The intention was always to make a massive tax switch and I had argued that in every conference speech I had made. The only question was how far we should go". The 15 per cent rate, he insisted, was only finallydecided just before the 1979 Budget. "We weren't able to know before taking office what the reaction in the Treasury would be."

Gordon Brown, Labour's shadow Chancellor said: "Now that Kenneth Clarke has made it clear that in principle he favours the extension of VAT, the Conservatives will be forced to come clean before the next election on what their private plans are."

News
The cartoon produced by Bruce MacKinnon for the Halifax Chronicle-Herald on Thursday, showing the bronze soldiers of the war memorial in Ottawa welcoming Corporal Cirillo into their midst
news
Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into disastrous conflicts
Voices
Nigel Farage has backed DJ Mike Read's new Ukip song
voicesNigel Farage: Where is the Left’s outrage over the sexual abuse of girls in the North of England?
Property
One bedroom terraced house for sale, Richmond Avenue, Islington, London N1. On with Winkworths for £275,000.
property
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Text messaging changes as a relationship evolves
life
News
The comedian, 42, made the controversial comment following the athlete’s sentencing to five years for the culpable homicide of Reeva Steenkamp on Tuesday
peopleComedian's quip about Reeva Steenkamp was less than well received at music magazine awards
Sport
Cristiano Ronaldo in action for Real Madrid
football
News
peoplePerformer had recently been diagnosed with prostate cancer
Life and Style
food + drink
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

SSRS Report Developer - Urgent Contract - London - £300pd

£300 Per Annum: Clearwater People Solutions Ltd: SSRS Report Developer – 3 Mon...

KS1 Teacher

£95 - £150 per day: Randstad Education Birmingham: Key Stage 1 teacher require...

HR Business Partner - Essex - £39,000 plus benefits

£32000 - £39000 per annum + benefits + bonus: Ashdown Group: Generalist HR Man...

Trainee Recruitment Consultant

£18000 - £30000 per annum + uncapped: SThree: Do you feel like your sales role...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?