The claim

“If you look at the effect (of VAT) as compared with people’s income then, yes, it is regressive”
Prime Minister David Cameron, PM Direct, 5th January, 2011

Cathy Newman checks it out

It would appear the Prime Minister spent last night reading FactCheck – which yesterday looked into his Chancellor’s claim that VAT is a progressive tax, and that changes to income tax or national insurance would have a “more damaging impact on poorer people.”

The Institute for Fiscal Studies told us there were two ways to look at VAT, either as a proportion of income or of expenditure. George Osborne was only looking at expenditure, suggesting it was fairer because poorer families spend more of their income than those better off on VAT-exempt goods – such as food, fuel and children’s clothes.

But the Prime Minister’s position today was a little more nuanced shall we say, perhaps trying to row back from the Chancellor’s claims. Acknowledging there are different ways to slice it, he said “If you look at the effect as compared with people’s income then, yes, it is regressive, so it depends if you’re looking at expenditure or whether you’re looking at income.”

After appearing confused by the Labour Party’s own economic policy yesterday, the Shadow Chancellor was quick to respond to the Prime Minister today. Alan Johnson said “David Cameron has tried to cover for his Chancellor and ended up sounding foolish. VAT is clearly a regressive tax.”

The verdict

The Prime Minster has got it right today – by acknowledging VAT could be considered regressive he’s earned a fact rating. He also avoided repeating the claim that higher taxes would be even worse for the poor – it was that mistake that earned the Chancellor his fiction rating yesterday.