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April 12, 2010    

VAT could rise to 20%

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by Kay Murchie

The Labour Government is not ruling out a VAT rise but is set to pledge not to raise income tax rates for the lifetime of the next Parliament.

These are two items set to be on Prime Minister Gordon Brown’s election manifesto today in Birmingham.

However, while the PM is leaving open the possibility of VAT reaching 20%, items such as children’s clothing and newspapers are set to remain zero rated.

Today, Ed Miliband, Energy and Climate Change Secretary, was asked about the VAT issue on BBC Breakfast today.

He was asked if Labour was “leaving the door open” for further VAT increases, he replied: “No, and in fact we haven’t raised VAT in the last 12 years. I just don’t want to go through every policy on taxation, because that is for the Prime Minister to announce later on today, that is the only reason.”

At the end of 2008, the Labour Government slashed VAT from 17.5% to 15%, in attempt to revive the High Street, which was flagging at the time as the UK was in recession.

It then reverted back to the 17.5% rate on 1 January 2010 but speculation has been mounting that the sales tax could increase, no matter which party wins the election.

In related news, the Conservative party is continuing with its election campaign by proposing to make four million married couples and civil partners £150 a year better off.

The tax break would apply to basic rate taxpayers earning under £44,000 where one partner does not use their full personal tax-free income allowance.

However, the marriage tax was criticised by Prime Minister Gordon Brown who said families with children would lose out under the Conservatives.

“I am a believer in marriage, and the institution of marriage is absolutely central and fundamental to our society,” said the PM.

Furthermore, Lib Dem leader Nick Clegg who is currently campaigning with wife Miriam Gonzalez Durantez said: “Miriam and I got married for love, not for three quid a week, it’s patronising drivel.”

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Tags: Conservative, , income tax, , manifesto, marriage tax, , pledge, ,