The new standard rate of VAT could become a permanent feature of the business landscape.
The rate is due to rise from 17.5 per cent to 20 per cent on 4 January.
In a press interview, the Chancellor, George Osborne suggested that the rise may be here for a good while.
Mr Osborne told The Spectator magazine: “The VAT rise is not temporary. It can’t be. We are talking about a totally different scale of revenue, and the VAT rise is a structural change to the tax system to deal with a structural deficit.
“Once we can bring some stability to the public finances, we can look at reducing the tax burden on people. But it is a complete mirage to cut taxes one year, then to have to borrow the money and put up taxes later to have to pay for that borrowing.”
But the Chancellor also hinted that the new 50 per cent top rate for income tax would not be a long-term measure.
