Tag Archives: Ed Balls

Cutting VAT on fuel – sending the wrong signals

Ed Miliband and Ed Balls are announcing some preliminary Labour economic policies today, and one of the headlines is a reduction in VAT on petrol, from 20% back to the 17.5% level it was set at prior to January this year. The main argument is that as petrol prices rise so this is hitting car drivers (read “middle England”).

It’s a short term solution, but I fear it will set a long term precedent – we should all be driving less, and be less dependent on oil, and a high fuel price is a crude way to achieve this, so today’s announcement is wrong. A fairer way to deal with this issue would be road pricing, but we know the mess Labour got into with that idea…

So what should Balls and Miliband say on fuel?

The solution is to set a flat rate tax on a litre of fuel, i.e. the same amount of cash goes to the exchequer, regardless of the price of oil. At the moment every litre of fuel is subject to the Hydrocarbon oil duty, currently £0.5895/litre, and VAT at 20%. This means that as the price of petrol goes up, so the amount of money the government makes from VAT on fuel also goes up, i.e. the motorist is hit twice. If price increases at the pump were only determined by rises in the price of crude it would be presentationally easier, not looking like the government is deliberately hitting the motorist, and also avoiding Labour advocating a VAT cut on fuel that symbolically looks anti-green.

Photo: tallkev “oldskool pump”
October 15, 2006 via Flickr, Creative Commons Attribution
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Brown’s reshuffle: Miliband should refuse to move, and Balls should be refused

David Miliband - photo from Facebook page

David Miliband - photo from Facebook page

The British newspapers have been full of analysis of the resignations of Jacqui Smith and Hazel Blears, but the big news is still to come with Brown’s cabinet reshuffle, pencilled in for either tomorrow or Monday next week. For me there are 2 crucial decisions that will determine how all of this works out.

First of all it has been widely rumoured that Peter Mandelson might be moved to the Foreign Office, replacing David Miliband. Aside from the oddity of having one of the major cabinet positions occupied by a member of the House of Lords, I think there is no justification whatsoever for Miliband to be moved. He’s been like a breath of fresh air at the FCO in comparison to Margaret Beckett his predecessor. So Miliband should refuse to move, and if forced out, should resign from Cabinet – and if that happens Brown is surely finished. Miliband’s determination to get to the very top was questioned last summer – he cannot be seen to blink again. If Miliband himself does accept a demotion that’s it for him for the forseeable future – others will have to lead Labour in the post-Brown era instead.

Secondly it has been suggested that Alistair Darling will be moved from The Treasury and replaced by Ed Balls. I’ve never been immensely impressed by Darling and, on expenses matters alone, a case could be made to replace him. But the replacement – if any – should absolutely not be Ed Balls. Brown’s bullying and abrasive henchman was at the Treasury with Brown during the boom times, and has probably already been over-promoted. Putting someone as unquestionably loyal as Balls as Chancellor is cronyism and will further weaken Brown and the Cabinet. If Balls is installed at the Treasury I wonder how many more backbenchers will sign letters opposing Brown?

Let’s see what happens, it’s sure to be an interesting few days.

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