James Forsyth

20 percent Vat is likely whoever wins the next election

20 percent Vat is likely whoever wins the next election
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I must admit that I thought that both the government and the Tories were committed to raising Vat to 20 percent after the next election. My recollection was that Vat rising to 20 percent was part of the PBR package that saw Vat temporarily cut to 15 percent and that the Tories had not opposed this part of the package. But having checked up, I see that this was not what was announced but merely what the Treasury was advocating internally.

The Tories might be denying the story that they will raise Vat to 20 percent but I would be very surprised if they did not end up doing so. Vat is an easy tax to collect and hard to avoid so as the Tories look for an instant way to show the markets they are serious about dealing with the national debt, Vat is the obvious tax to increase.

Any attempt to bring the budget back into balance should focus on bringing down spending through cuts, reforms and reducing the demand for government. But in the short term, there are likely to have to be some tax increases. The Tories should be prepared to be frank about this but balance this with a commitment to reducing the overall tax burden over the next decade.