VAT rise one step closer as Coalition wins Commons vote

 

Efforts to block the proposed increase in VAT have been quashed after the Coalition Government secured a majority in a House of Commons debate.

 

There had been calls for the Finance Bill, which enacts the measures outlined in the Chancellor’s June Budget, to be amended in order to prevent VAT rising to 20% next year.

 

However, the amendment was defeated by a majority of 295, while a separate vote saw MPs approve the 2.5% VAT rise by 321 to 246, a Government majority of 75.

 

The Chancellor, George Osborne, hopes the increase will net the Treasury an estimated £13 billion and go some way to reducing the UK deficit.

Treasury minister David Gauke said VAT was ‘one of the few levers available’ to the Government to address the shortfall in the public finances. ‘We had to raise VAT because there was no money left,’ he added.

But opponents have argued that the move will hit many of Britain’s most vulnerable groups hard, with the shadow chief secretary to the Treasury, Liam Byrne, warning that pensioners could face ‘an £8bn VAT bill over the course of this Parliament’.

 

In his austerity Budget last month, Osborne announced that the standard rate of VAT will rise from its current rate of 17.5% to 20% with effect from 4 January 2011.