Top economists are expecting the new coalition government to raise VAT to 20% to help plug the gaping budget deficit.
Economists used by the treasury predict that David Cameron’s new government will raise the sales tax before the end of 2011.
As part of the new coalition deal, the government said it 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.