Commons vote confirms VAT rise

14 July 2010

Attempts in Parliament to head off the government's proposed increase in the rate of VAT have been defeated.

The Chancellor, George Osborne announced in the emergency Budget last month that the standard rate of VAT would rise from 17.5 per cent to 20 per cent as from 4 January 2011.

An amendment to the Finance Bill to block the hike, put forward by the nationalist parties, was voted down by a majority of 295 votes in the House of Commons.

Another challenge, backed by Labour, called for a delay in implementing the increase so that its effects could be assessed. This, too, was defeated by a government majority of 75.

A further Labour amendment, which would have seen charities and other groups exempted from the rise, was similarly rejected.

The voting formed part of Parliament's debate of the Finance Bill, which enacts the measures set out in the Budget.

David Gauke, the Treasury Minister, describing the VAT rise as "one of the few levers available" to the government to address the shortfall in the public finances, said: "Any sensible government would consider it. And, given the circumstances we're in, any government would do it. We had to raise VAT because there was no money left."

He dismissed calls for a time limiting sunset clause on the increase, arguing that it would have an adverse impact on the pattern of government expenditure.