More news on some of the controversial claims surrounding the impact of the VAT rise.

The Times today comes out in favour of the tax hike as “economic sense”, criticising the Labour Shadow Chancellor for some of the claims he made yesterday about the economic impact.

An editorial in the paper states that “his claim that the VAT rise would cost 250,000 jobs appears to be a figure plucked from the ether without supporting evidence.”

So is this key bit of ammunition in Labour's anti-VAT arsenal little more than a figment of the imagination of Mr Johnson and his team?

Actually the claim does not belong to Labour's fledgling fiscal spokesman, but the Chartered Institute for Personnel and Development (CIPD), though this is not to say there is no controversy over their figures.

It first surfaced back in November as part of a CIPD forecast that by 2015-16 the policies being implemented by the coalition Government would cost 1.6 million jobs. According to their figures 250,000 of this would be down to the new VAT rate.

The 1.6 million figure was questioned at the time, with the Institute of Directors calling it,”baseless doom mongering” and Conservative MP Michael Fallon dismissing the estimate as being “as reliable as a dead octopus”.

However when we called the CIPD to get a bit more explanation on the cuts attributed to the VAT rise, and how the 250,000 figure specifically was arrived at. They provided us with this explanation:

“The CIPD estimates that the rise in VAT from 17.5% to 20 per cent will reduce UK employment by 250,000 over a five year period relative to the level of employment that would otherwise be achieved. The impact is obtained by taking estimates of the impact of the forthcoming rise in VAT on consumption of goods and services, taking account of both first and second order effects, and translating this into an impact on employment.

“Our primary source was an estimate of the VAT tax multiplier produced by National Institute for Economic and Social Research (NIESR) at around the time the former Labour government was proposing to lower the standard rate of VAT to stimulate demand during the recession. The VAT multiplier gives the effect of the tax increase (or decrease) on real GDP. The Office for Budget Responsibility (OBR) has subsequently produced its own estimate of the VAT multiplier which is consistent with the NIESR estimate. The OBR suggests that the increase in VAT to 20% will reduce real GDP in 2011/12 by 0.3%.

“The CIPD then used this multiplier estimate to provide employment estimates. The employment impact does not depend on businesses passing on the VAT increase in part or full.”

Economic forecasting is hardly the stuff on which close consensus is built, particularly when it comes to putting a figure on job losses over the next five years that could be specifically attributed to a single tax rise.

Nevertheless to suggest the figure is completely without supporting evidence seems overly harsh.

Contentious the figure may be, but plucked from the ether it is not.