The Conservative Party has insisted that it would not need to increase VAT in order to cut the deficit if it forms the next Government as Prime Minister Gordon Brown is today expected to confirm that the next general election will be held on May 6.
The Government has accused the Conservative Party of planning tax increases if it is to scrap the proposed increase in National Insurance, according to the Telegraph.
The row is expected to be one of the key battle grounds fought over in the election campaign, with many retailers backing the Tories’ decision not to increase the tax.
Shadow chancellor George Osborne promised to reduce the deficit by cutting public spending, as opposed to increasing taxes.
He said: “The plans we set out involved around 80% of the work coming from spending restraint and about 20% from tax increases. The tax increases are already in place, the plans do not include an increase in VAT.”
The Conservatives have pledged to pay for the scrapping of the National Insurance rise by cutting waste in the public sector. Osborne has argued that raising the tax, which is paid by both employers and employees, would lead to a rise in unemployment and threaten the economy.
A raft of retailers put their names to a letter sent to the Daily Telegraph last week, which opposed any rises in National Insurance.
The retailers included: Next boss Simon Wolfson; Kingfisher chief Ian Cheshire; Sainsbury’s chief executive Justin King; Carpetright chairman Lord Harris; Kurt Geiger chief executive Neil Clifford; Mothercare boss Ben Gordon; Peacocks chairman John Lovering; Matalan chief executive Alistair McGeorge and Harvey Nichols chief executive Joseph Wan; and Marks and Spencer executive chairman Sir Stuart Rose.
In the letter the businessmen protested that the 1p in the pound rise in both staff and employers’ NI contributions, set to be brought in next April under a Labour government, could lead to widespread job cuts and put the economy in peril.