Report suggests government VAT disagreement

Date: 11th December 2009

The Pre-Budget Report originally contained plans to increase VAT, it has been claimed.

Chancellor of the exchequer Alistair Darling, who delivered the Pre-Budget Report to parliament on Wednesday (November 9th), wanted to raise the sales tax above 17.5 per cent, the Guardian reported.

However, he is said to have been persuaded instead to announce an extra 0.5 per cent increase to National Insurance from April 2011, under pressure from prime minister Gordon Brown.

VAT is currently at a temporary lower rate of 15 per cent as an economic stimulus in the recession and will revert to 17.5 per cent on January 1st 2010.

The government wants to raise taxes as a way of improving the deteriorating public finances caused by the recession.

Official forecasts suggest that public borrowing will reach a record £178 billion this year.

Among the other tax measures announced in the Pre-Budget Report was a scrapping of the planned 1 per cent increase to corporation tax.

'Bingo tax' has also been lowered.

Posted by Thomas Fletcher