VAT rise blocked by PM
Gordon Brown is reported to have convinced Alistair Darling to raise national insurance instead of VAT
Alistair Darling wanted to increase VAT to a much higher rate but was blocked
by the prime minister.
Cabinet sources told
The
Guardian the chancellor wanted to increase VAT to more than 17.5% but was
convinced by Gordon Brown to raise national insurance by 0.5% instead.
Follwoing the announcement this week shadow chancellor, George Osborne, said
the rise in NI is a tax on jobs.
The
Guardian calculated that a 1% rise in NI should raise £4.48bn for the
country in a year. In contrast a 1% rise in VAT will generate more at £4.8bn.
The Tories claim the impact of the NI rise to the NHS will increase by £446m
in employer contributions alone.
It is estimated returning VAT to its original rate of 17.5% on 1 January will
restore £12bn in revenues for the country.
Further reading:
PBR
09: Retail ‘disappointed’ over end of 15% VAT rate
PBR
09: Cable attacks “unfair” and “optimistic” pre-Budget report