theVATlady

For most people, unless you’re an expert like me, VAT is a bugger to understand. But it’s disturbing when a political party, who should surely ‘get’ the VAT system, gets it so badly wrong. A recent labour Party billboard advert has fallen foul of critics by trying to put across its message by highlighting the extra consumer cost of a bunch of VATable products, most of which are actually VAT-free.

The ad, showing David Cameron and Nick Clegg as green peas in a pod, claims that the Lib Dem-Conservative coalition’s VAT rises have added an extra £450 to our shopping bills. But their latest effort to poke fun at the government has backfired embarrassingly.

The problem? The slogan “They put £450 extra VAT on your shopping bill” has landed them in hot water because, as pointed out by the former Labour chancellor Alistair Darling, he himself also had plans to increase VAT.  But there’s more…

VAT free or not? Even politicians are confused

Even more embarrassing, the majority of the items illustrated in the advert as eligible for VAT were actually VAT-free… including the peas themselves, the fruit , the veg and the chocolate chip biccies. The advert did contain a few VATable products, namely a bottle of washing-up liquid, some bottled soft drinks and some beer. Weirdly, the non-chocolate chip biscuits are actually liable for VAT, a sub-story that accidentally highlights how silly the VAT system has become in recent years.

Suspect statistics

There are also questions about the source of Labour’s claim that shoppers are facing an extra £450 on top of their shopping bills as a result of the coalition’s VAT policies. Nobody is sure where the number came from, but it could be talking about a timescale covering several years. Otherwise, as critics have worked out, shoppers would have had to spend a whopping £18,000 extra on standard VAT-rated stuff at a 20% VAT rate to clock up such a huge extra spend.

Hilarious Twitter parodies

As you can imagine, the advert and the reaction to it spawned a host of Twitter-led parodies, causing a great deal of amusement as well as highlighting the considerable complexity of the current VAT system, and pointing out the dangers of messing with statistics you don’t really understand.