George Osborne has been accused of misleading the Commons Treasury select committee in order to orchestrate a “political setup” for Ed Miliband during the following day’s prime minister’s questions.

During his appearance in front of the committee on Tuesday, the chancellor of the exchequer refused five times to rule out raising VAT if the Conservative party won the next election. But during Wednesday’s prime minister’s questions David Cameron unexpectedly ruled out raising the tax, scoring a victory over the leader of the opposition, who was, in turn, unable to rule out his party increasing national insurance.

John Mann, a Labour member of the Treasury select committee, described Osborne’s failure to disclose that his party would rule out the tax as the most serious breach of the select committee system in parliamentary history.

Speaking to the BBC Radio 4’s Today’s programme, the financial secretary to the Treasury, David Gauke, confirmed that Osborne would have known about his party’s decision to rule out a VAT rise, but avoided mentioning it, leaving it to be announced during prime minister’s questions, presumably for maximum political effect.

“We’ve been very clear for a long time that there’s no need for us to increase VAT,” said Gauke. “There have been discussions in the last few weeks as to whether to go further to, if you like, change the language and that decision has been made in the last few weeks.”



He continued: “It was a question as to when is the best time to make our case. I think there’s nothing wrong with making that announcement to the House of Commons at prime minister’s questions.”

Mann said that select committees were created by law to hold the government and financial regulators to account and that they needed to be given straight answers.

“If the governor of the Bank of England or the financial regulator did that in front of our committee they would have to resign because we are there to hold whoever is the government to account on a cross-party basis on what they’re saying and what the facts are,” he said.

“That is our statutory role and for the chancellor of the exchequer to mislead the committee, then for it to be a political setup the next day ... brings into disrepute the whole select committee system. You cannot have checks and balances if we don’t get those answers.”

After Labour launched an attack on the Conservative party for failing to rule out a VAT rise, including a campaign poster and YouTube video warning voters that a Tory government would hike the tax, Cameron unexpectedly responded to a question from Miliband during prime minister’s questions about whether he would rule out the tax rise with a simple “yes”.

Cameron then retaliated by asking the Labour leader whether he could rule out raising national insurance, something Miliband did not do. A few hours later the shadow chancellor, Ed Balls, said the Labour election manifesto would contain clear commitments not to raise NI.

Speaking to Today programme, shadow Treasury minister Shabana Mahmood denied that the announcement had been a knee-jerk reaction, saying: “It’s completely appropriate for Ed Miliband at prime minister’s questions to be putting the questions to the prime minister and not to be making announcements about Labour party policy in that moment.”

The moves by the two parties, which amount to the most significant announcements on tax policy before the election, mean that the next government of whatever party will have less room for manoeuvre on taxation.

VAT, national insurance and income tax raise the vast majority of revenue. The Tories have already made clear that the only extra tax they plan to raise will come from a £5bn crackdown on tax avoidance.

Labour had been planning to announce that it would not raise the basic and higher rates of income tax, which stand at 20% and 40%. It has pledged to restore the top rate of tax, lowered by Osborne in his “omnishambles” budget in 2012 to 45%, back to 50%.

The Institute for Fiscal Studies (IFS) warned that Labour and the Conservatives had “boxed themselves in” by ruling out increases in Britain’s three main taxes that raise 60% of revenues.

The IFS said that in the event of an economic downturn, the two main parties would have little room for manoeuvre in the next parliament.