Reports over the weekend suggested that plans for an emergency budget are being drawn up to pull the UK out of debt and that these included a hike in VAT which would take place within weeks of a Tory victory.
If such a proposal went ahead, it could raise up to £10bn a year but the Tories denied this yesterday saying that there had been no discussions about this at a senior level.
Speaking on Sky News, shadow foreign secretary William Hague said: “There are no plans in existence in the Conservative party for such a VAT rate and you can’t ask George Osborne to write the 2010 budget now, given the shocking state of the nation’s finances.”
BDO Stoy Hayward head of VAT Marc Welby says: “I don’t believe anyone should be surprised if the VAT rate is increased – the budget deficit needs to be addressed and there is a limit, at least in the short term, as to how quickly costs can be cut.
“With most commentators considering that the case for raising taxes in the medium term has now been established the only remaining questions are which taxes and by how much.
“VAT is, perhaps, an obvious candidate as it would raise substantial revenues and a VAT rate of 20 per cent would bring the UK closer to the EU average of 19.5 per cent.”
Chancellor Alistair Darling temporarily cut VAT from 17.5 per cent to 15 per cent in last year’s pre-Budget report in a bid to boost spending – a move that is due to end on January 1 next year.