Shadow business secretary Kenneth Clarke has signalled that a Conservative government would be ready to raise taxes – including VAT – if they win this year’s general election.

In an interview with the Sunday Telegraph, Clarke said it would be “folly” to rule out tax rises alongside draconian cutbacks in public spending to help cut Britain’s deficit.

He said: “It is something that every Conservative tries to avoid but I didn’t avoid it when I was getting us out of recession before [in the 1990s]. Coming out of a recession when you have such a severe deficit you can’t rule out putting up taxes.

“If you can’t get it down quickly enough, in order to maintain the confidence of the markets and to create conditions for growth and employment, then you may have to look at tax increases.”

On VAT, which some commentators expect the Tories to raise to 20% at least temporarily if they win power, Clarke said: “When you’re the most indebted country in the western world, and people are talking about looking at the credit rating of the country, and we’re not sure that foreigners are going to buy gilt-edged bonds to finance our debt, then you cannot start promising you are not ever going to start increasing taxation.

“We will try to avoid it, we’ll minimise it if we have to by having proper control of public spending, which we haven’t had in this country in the last 12 years.”

VAT rose to 17.5% on January 1 but many retailers have been holding off putting prices up while they run their Sales.

Separately, the Tories will also pledge to set up a new supermarket ombudsman charged with powers to prevent big retailers using their size and influence to squeeze the profit margins of farmers and suppliers. Shadow farming and environment spokesman Nick Herbert will tell the farming community today that a Conservative government will create a new body as a dedicated unit within the Office of Fair Trading. The new body would be funded by a levy on bigger supermarkets with an annual turnover of more than £1bn.