Top economists are expecting the new coalition government to raise VAT to 20% to help plug the budget deficit.
Treasury economists predict that Prime Minister David Cameron’s new government will rasie the sales tax before the end of 2011.
As part of the new coalition deal, the government said it is is committed to a “significantly accelerated reduction” in the budget deficit.
Analysts estimate that bringing VAT up to 20% would bring in an extra £11.5bn a year.
The new government confirmed yesterday it would scrap Labour’s planned National Insurance rise, which had been opposed by many retail leaders.