Theresa May vows not to raise VAT but won't rule out other income tax increases

The Prime Minister hinted she may scrap the flagship 'tax lock' that promised no raises in VAT, income tax or national insurance

The Prime Minister toured the TV studios on Sunday morning, indicating to both the BBC and ITV that the 'tax lock' could go (Reuters)

Theresa May has indicated she could raise income tax or national insurance if she wins the general election, as she refused to guarantee that her manifesto would repeat previous promises not to raise income tax and national insurance. But she did confirm she would not raise VAT, matching the same promise made by the Labour Party.

She also disputed suggestions made by EU Commission President Jean-Claude Juncker that the UK must agree on and settle its costs for leaving the EU before any talks could take place on future trading arrangements.

Appearing on both the BBC’s Andrew Marr Show and ITV’s Peston on Sunday she denied she was “living in another galaxy” with regard to the outcomes of the UK’s forthcoming negotiations with the EU, as unnamed European leaders were reported to have said in The Sunday Times.

“I’m not in a different galaxy,” she told Mr Marr. “I think what this shows and what some of the other comments we’ve seen coming from other European leaders show is that there are going to be times when these negotiations are going to be tough.”

Since Chancellor Philip Hammond was forced to go back on his plans to raise national insurance contributions for the self-employed on the grounds that it directly broke a manifesto commitment, the Prime Minister has refused to confirm that the so-called “tax lock” on national insurance, income tax and VAT, preventing any of them from rising, would remain in place in this election.

Theresa May has said she will not raise VAT if the Conservatives win the election, but stopped short of making the same commitments on income tax and national insurance.

Mr Peston challenged her on her statement, made on the steps of 10 Downing Street last July, that she would govern in the interests of those who were “just about managing,” when every independent economic assessment indicates that economic difficulties of the next few years will disproportionately affect poorer people.

Ms May said: “We have no plans to raise the level of tax. In relation to specific taxes, we won't be increasing VAT.”

Shortly beforehand, she had told BBC One’s Andrew Marr Show: “We have absolutely no plans to increase the level of tax but I’m also very clear that we don't want to make specific proposals on taxes unless I’m absolutely sure that I can deliver on those.”

The tax lock has proved troublesome for Chancellor Philip Hammond, who was forced into a humiliating U-turn after last month’s Budget when a revolt from backbench Tory MPs made him ditch planned national insurance increases for the self-employed.

Ms May said: “I’m clear that we have no plans to raise the level of tax. We won’t be increasing VAT but what I do want to ensure is that when we do look more widely at the tax system, that what we say, we’re absolutely clear we can deliver on.”

She added that the very rich were paying more than their fair share.

“If you look at the percentage of tax that’s being paid by the very richest, the top one per cent of people are actually paying a higher percentage of the overall income tax than in any year under the Labour government,” she said.

She also rejected the idea the UK must settle the EU’s demands for an exit payment that could be as high as £50bn before beginning trade talks.

The Prime Minister said EU leaders knew that “nothing is agreed until everything is agreed” and claimed she was “confident” of securing a good Brexit deal.

Her comments came as the other 27 EU leaders agreed their final negotiating guidelines, including an insistence on a “phased” approach which would put the rights of EU citizens and the disputed “divorce bill” as part of the first tranche of issues to be dealt with before trade talks begin.

Ms May told BBC One’s Andrew Marr Show: “What they (EU leaders) are very clear about is, yes, they do want to start discussions about money.

“I’m very clear that at the end of the negotiations we need to be clear not just about the Brexit arrangement, the exit, how we withdraw, but also what our future relationship is going to be.”

Pressed on whether she would commit to paying a divorce bill before Britain leaves the bloc, she said: “The EU has also said that nothing is agreed until everything is agreed.”

European Council president Donald Tusk has previously said that reciprocal guarantees, which also provided certainty for British ex-pats living on the continent, were foremost among issues to be addressed.

Mrs May said: “There are things we absolutely agree on should be early in those discussions, the position of EU citizens living here in the UK and the position of UK citizens living in those 27 European countries, absolutely we agree should be in the discussions.”