Page last updated at 20:04 GMT, Tuesday, 25 November 2008

Treasury eyed VAT rise to 18.5%

Alistair Darling after delivering PBR
The Treasury says the VAT policy set out in the PBR is unchanged

The government considered increasing Value Added Tax (VAT) to 18.5% from 2011, a Treasury document has shown.

The detail mistakenly appeared in documents published alongside Monday's pre-Budget report, but the Treasury insists the rise is not planned.

VAT has been cut from 17.5% to 15% - where it is set to stay for 13 months before returning to 17.5% in 2010.

The Treasury document says it will rise to 18.5% in January 2011 - but this was left in by mistake, a spokesman said.

The note - signed off by Stephen Timms, the Financial Secretary to the Treasury - outlined how VAT would "subsequently increase to 18.5% in 2011-12".

The Treasury insists that the government has no plans to raise VAT. That, of course, does not rule out them forming those plans in future.
Nick Robinson
BBC Political Editor

However the proposal was not taken out of the final draft of the memorandum.

'Fairest options'

The Treasury told the BBC that this was an option that had been "considered and rejected".

"In all budgets, ministers consider a range of policy options, most of which are rejected," a spokesman said.

"As the Chancellor said in his PBR statement 'we considered a number of options to raise revenue in future years, and I have chosen those which are fairest'.

BBC political editor Nick Robinson said that the error suggested that decisions on what to do about VAT were still being made very soon before the pre-Budget report was published.

In the lead up to the PBR, sources had told the BBC that raising VAT was being seen as one way of revenue raising to cut the government's amount of borrowing.

The Conservative leader David Cameron said that the news was a "secret tax bombshell".

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