Mandelson Backpedals On Tax

by Robert Lee, Tax-News.com, London

22 March 2010

UK Business Secretary Peter Mandelson has attempted to distance himself from comments he made in a debate with his opposite number in the Conservative Party that a re-elected Labour government would have to re-examine its loose pledge not to raise any more taxes.

In the March 18 debate on the UK economy in front of business leaders, in which Shadow Business Secretary Ken Clark also took part, Mandelson appeared to suggest that further increases in taxation over and above the measures already announced would be considered as part of a review of tax and spending in March 2011, should the Labour Party win the forthcoming general election.

"We will prepare for that in a way that will enable us to judge much more carefully, and much better, what we have to do, what the economic circumstances require, both in raising taxation should that be further necessary in addition to what we have already announced," Mandelson said.

Mandelson insisted after the conference that his remarks had been misinterpreted. "I made absolutely no suggestion or prediction that taxes would go up that year or next year," he said. "There is absolutely nothing that I said that suggested or implied that we have other tax plans that we are going to bring out at a future time."

However, Mandelson's comments have served to heap yet more confusion on the issue of the government's tax policies after senior Treasury Minister Liam Byrne first denied that the government was planning to increase tax in the upcoming budget, but then seemingly indicated that a rise in value-added tax hasn't been ruled out.

However, those hoping that the Conservatives will offer a tax-cutting alternative to the current government will be disappointed to hear that remarks made by Clark have merely muddied the waters further with regards the two main parties' fiscal policies. While a firm supporter of tax cuts, Clark suggested that it would be hard for tax to be cut early into a Tory administration while the deficit, at 12% of gross domestic product, remains so high. In doing so, he effectively ruled out a pledge by Shadow Chancellor George Osborne to try and cancel a planned 1% increase in National Insurance Contributions, dubbed by the Tories as a "tax on jobs", in the first 50 days of a Conservative government, during which time he plans to announce an 'emergency' budget.

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