The Conservatives are studying plans to increase VAT to 20 per cent if they win power at the next election as part of an “emergency” package to pull Britain out of the red.
The proposal – likely to raise up to £10 billion a year – is being “very actively considered” at the highest level, according to senior shadow ministerial sources.
It could be introduced within weeks of a Tory victory at the next election, which must be held by June, in a package that is also likely to include severe cuts to public spending.
David Cameron, the Tory leader, and George Osborne, the shadow chancellor, are understood to have reluctantly concluded that the state of the public finances they are likely to inherit will mean that simply cutting spending by tens of billions of pounds will not be enough.
A shadow ministerial source said: “Tax rises will have to be part of the equation. It will be time for some strong medicine.”
By moving quickly to increase VAT after the election, senior Conservatives believe they will be able to pin the blame for the state of the public finances on Gordon Brown and his outgoing Labour government