Darling considered raising VAT
Updated on 25 November 2008
Chancellor Alistair Darling considered raising VAT to 18.5 per cent in 2011, but rejected the idea, it has emerged.
The proposal was included in a draft Treasury document written last week ahead of Monday's Pre-Budget Report (PBR) and was accidentally published on an official website.
In the PBR, Mr Darling cut VAT by 2.5 per cent to 15 per cent as part of a £20 billion fiscal stimulus package designed to help restore economic growth.
He told MPs the tax would return to its previous level - 17.5 per cent - in January 2010 and acknowledged that there would have to be other tax increases at a later date to pay for the borrowing he is undertaking now.
But he said the bulk of the burden would be carried by wealthier individuals, with a new 45 per cent income tax rate for those earning more than £150,000 and changes to national insurance which will see people on more than £40,000 paying more from 2011.
The draft Impact Assessment document, mistakenly published on the Office of Public Sector Information website, indicates that the Chancellor considered, at least for a while, hiking up a purchase tax which would affect all British consumers.
A Treasury spokesman said: "This was an option that was considered and rejected. In all Budgets, ministers consider a range of policy options, most of which are rejected.
"As the Chancellor said in his PBR statement to Parliament: 'We considered a number of options to raise revenue in future years, and I have chosen those which are fairest'.
"As is set out in the statement and the PBR book, the standard rate of VAT will be reduced to 15 per cent from December 1, until December 31 next year, after which it will revert to 17.5 per cent."
Shadow chancellor George Osborne claimed the document showed Prime Minister Gordon Brown has a "secret plan" to increase VAT permanently to 18.5 per cent after the next election
Mr Osborne said: "This is Labour's secret tax bombshell. It explains why there is a black hole in the PBR. Because at the last minute Gordon Brown clearly decided to keep secret his plan to hit everyone with an extra tax rise to pay for his borrowing binge."
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