I remember having a passionate argument with John Pardoe about VAT in a pub during the Cambridge City by-election. Pardoe enjoyed Vince Cable levels of popularity as a liberal economic spokesman in those days – his flagship policy proposal was reducing income tax and increasing sales tax (sorry, too lazy to check if it was already called VAT then). He characterised it as switching from tax on income to tax on consumption. I was 17. I took myself very seriously in those days; it was with retrospect kind of him to do so.
I argued VAT was regressive – the rich and the poor pay at the same rate. As the poor save less, it means a higher proportion of their income will go on tax. Pardoe said the rich buy more expensive luxury goods, so will pay more tax.
I haven’t changed my mind in the intervening 35 years. I would much rather the extra 13 billion pounds had been raised by increasing income tax on incomes over the higher rate threshold.
I very much welcome the curtailment of housing allowances, which have boosted both private sector rents and property prices and contributed to Britain’s still overheated housing market.