Theresa May promises no increase in VAT, hints at other tax rises

Says, she will not make 'specific proposals' before vote on raising income tax, VAT or insurance

UK 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 programme 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-TV’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. The British PM expects divorce talks with the EU to be tough, she said on Sunday after EU leaders agreed stiff terms and voiced alarm at "illusions" in London that may wreck a deal. "What this shows, and what some of the other comments we've seen coming from European leaders shows, is that there are going to be times when these negotiations are going to be tough," May told the BBC a day after her EU peers agreed on demands they want met to avoid chaos when Britain leaves the bloc in 2019.

At Saturday's Brussels summit of the 27 other EU states, EU chief executive Jean-Claude Juncker accused unnamed pro-Brexit figures of underestimating the complexity of the task and German Chancellor Angela Merkel repeated her concern that London still harboured "illusions" about negotiating a quick free-trade pact.

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 per cent. “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. 

“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.