Thursday 13 May 2010

VAT will have to rise, say economists

VAT is set to rise under the new coalition government, according to a BBC survey of influential economists. Of 28 independent economists currently used by the Treasury to assist its forecasts, 24 said they expected the rate to rise in the coming parliament. The majority predicted a rise from the current 17.5% to 20% before the end of 2011. Analysts say a 20% rate would raise an estimated £11.5bn a year.

VAT was temporarily cut last year to 15% to aid the economic recovery. But the tax on consumer goods is seen as an attractive way to boost the government's tax income, with cutting the country's budget deficit a priority for the new Conservative-Liberal Democrat coalition. There are 35 economists listed as independent consultants for the Treasury's UK economic forecasts. Six declined to take part in the BBC's survey.