VAT rise is bad economics, further spending cuts are needed to get deficit down

Prof Philip Booth comments on the VAT rise

Responding to today’s rise in VAT, Prof Philip Booth, Editorial and Programme Director at the IEA, said that the move is the result of insufficient attention being paid to spending cuts.

He said:

“Today’s VAT rise is simply bad economics and important potential spending savings have been avoided for transparently political reasons.

“Government spending, despite the Chancellor’s proposed savings, needs to be cut further. We did not get ourselves into the current situation because taxes were too low but because government spending rose out of control. Ring-fencing the NHS budget whilst simultaneously increasing the foreign aid budget, for example, are simply indicative of politically-motivated profligacy and not good economics. Furthermore, proposed increases in pensions above the rate of inflation and the retention of quirks such as free bus travel and the winter fuel allowance cannot be justified given that they have led to the necessity to increase VAT.

“If the gov