Page last updated at 10:36 GMT, Wednesday, 14 July 2010 11:36 UK

Lib Dems accused of abandoning principles over VAT

SNP spokesman Stewart Hosie has accused the Liberal Democrats of abandoning their principles on VAT for "the possibility one day of a ministerial Mondeo".

During resumed debate on the Finance Bill, which enacts the Budget, on 13 July 2010, Mr Hosie put forward an amendment aiming to block the government's planned VAT rise from 17.5% to 20% in January 2011.

Mr Hosie said that the proposal was "socially irresponsible, economically damaging and most of all hurts those at the bottom of the pile".

He noted that Liberal Democrat election posters warned of the Tories' VAT bombshell and said the hike directly contradicted the stated aim of both parties to create a "fairer society".

"The Lib Dems were right before the election when they warned about the Conservatives' VAT bombshell," he said.

"It's no less threatening and fatal today, and I do wonder... if this isn't the time to stick with principle and perhaps forego the possibility one day of a ministerial Mondeo."

Shadow chief secretary to the Treasury Liam Byrne called for reports to be prepared on the impact of the proposed VAT hike on pensioners, child poverty, inequality, charities, the black market and the poorest 20% of households.

These could then be used to bring forward measures to compensate those hit hardest by the tax rise, he said.

Winding up the debate, Mr Byrne said the chancellor had made a "wrong-headed decision" on VAT as part of a "damaging" Budget.

Treasury Exchequer Secretary David Gauke said the government had inherited a record budget deficit and had no option but to tackle it.

He argued that the VAT rise had to be seen in the overall context of the Budget and was the "least economically damaging" way to deal with the deficit.

The amendment proposed by Mr Hosie was rejected by 316 votes to 21, a government majority of 295. Labour abstained, pledging to vote against the clause as a whole later in the debate.

Watch part two of the debate here.

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