VAT set to rise

Published:  13 May, 2010

LONDON: VAT is set to rise under the new coalition government, according to a BBC survey of influential economists.

Of 29 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.

Any changes to VAT and other taxes are likely to be unveiled in an emergency Budget to be announced within 50 days.

Economist Azad Zangana, from Schroders, who is predicting a rise in VAT to 19%, said that the UK economy is probably strong enough to withstand the expected cuts and tax rises. "While earlier cuts in public spending are inevitably going to dampen economic growth, the UK recovery appears to be gathering pace," he said.

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