Brown drops 20% VAT hint

Date: 27th November 2008

A hike in the rate of VAT to 20 per cent was one of the measures considered for the pre-budget report, it has been suggested.

On Monday (November 24th), chancellor Alistair Darling opted to reduce VAT from 17.5 per cent to 15 per cent on a 13-month basis.

But a leaked parliamentary document later showed that the government was close to raising VAT, a development which led Tory leader David Cameron to challenge prime minister Gordon Brown in the Commons.

The prime minster responded: "I've said we considered all options, but we rejected options [too].

"We chose options that were the fairest to ordinary and hard-working families."

Following the pre-budget report, which measures included adding a new 45p income taxation band for top earners, shadow chancellor George Osborne claimed that the winner of the next general election would inherit "a complete basket-case of an economy".

The new rate of VAT will come into force this Monday.