VAT rise 'dropped just days ago'

The PM and Mr Darling dropped the proposal for an 18.5% VAT rate
A rise in Value Added Tax to 18.5% was in the government's plans until less than a week ago, the BBC understands.

A Treasury document published online by mistake showed it considered bringing in the rise from 2011. The Treasury says the plan was later rejected.

The government is to cut VAT from 17.5% to 15% for 13 months to boost spending.

The Tories say the document shows plans for a "secret tax bombshell". The Lib Dems said ministers might be retaining a rise as a post-election option.

VAT is to be reduced from next Monday and return to its current rate on 31 December 2009, under measures aimed at boosting the economy outlined in Monday's pre-Budget report.

'Fairest options'

But the Treasury note accompanying an order to Parliament, published on a government website, said VAT would "subsequently increase to 18.5% in 2011-12".

BBC political editor Nick Robinson said he had been told the VAT rise was in the government's plans until less than a week ago - when Prime Minister Gordon Brown and Chancellor Alistair Darling met to consider their pre-Budget options

They decided not to go ahead with it but to increase National Insurance and introduce a new 45% top rate on income tax instead.

A Treasury spokesman said the VAT increase was "an option that was considered and rejected".

He said the chancellor had made it clear in his pre-Budget statement to Parliament that "a number of options to raise revenue in future years" had been considered and he had "chosen those which are fairest".

But the Conservatives say there is a "black hole" in the government's plans to repay record borrowing, which would have been filled by a 1% VAT rise.

'Scaremongering'

Party leader David Cameron told the BBC: "That's why the budget doesn't add up, that's why there's such a big black hole, that's why everyone is saying this budget isn't convincing and it isn't.

"There's a secret tax bombshell coming down the road at every family in the country."

Treasury minister Angela Eagle said publication of the document had been "a pure administrative error" adding: "For anyone to think it is anything else is complete scaremongering and opportunism of the worst sort."

MPs will discuss the pre-Budget report for three hours on Wednesday, after shadow chancellor George Osborne secured an emergency Commons debate.

He had said it was a "disgrace" that MPs were not allowed to debate Mr Darling's "reckless gamble".

The chancellor unveiled plans to take borrowing to record levels, cut VAT and cut public spending growth to try to boost the economy and stave off a long recession.

He told the BBC on Tuesday that people earning more than £150,000 would shoulder the "lion's share" of tax increases from 2011 onwards.

Liberal Democrat Treasury spokesman Vince Cable has questioned whether the temporary VAT cut will be sufficient to give the economy a boost and has called for permanent tax cuts for the low paid and those on middle incomes.

'Unpalatable'

He said the draft document which outlined the 18.5% VAT proposal showed that it was being considered "very, very carefully - probably to the last moment" by the government.

He said there were two possibilities about the proposal - one that it was pulled because it was not "politically palatable", which, he said, explained "the very large deficit in their presentation".

The other was "that they still have this on the stocks for after the election", he said.

"It seems fairly clear that not only did they consider it among other options but this was very close to being adopted.

"And I think we can infer from that, if they do need to raise more revenue either before the election or after it - this will almost certainly be the preferred course."



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