U-turn (well, for now) on secret Pre-Budget Report plan to raise VAT to 18.5% in 2011 – and is 20% on the cards?

A Treasury document was discovered on the Government website a few hours ago, late on Monday 24th November. It was a briefing paper on the Chancellor’s Pre-Budget Report – but with additional measures not contained in the issued version.

This document makes it clear that there is a plan not only to return VAT to 17.5% on 1st January 2010 – but to raise it to 18.5% in 2011.

The Government are denying that they plan to do this but the existence of the document undermines the denial.

Given the degree of smoke and mirrors For Argyll drew attention to in the Pre-Budget report plans delivered yesterday – and the hidden details that have emerged from the unannounced fine print earlier today of the whacking hike in tax on whisky – this adds to the damaging perception of deception by the Government, by the Chancellor and by the Prime Minister, Gordon Brown.

This morning’s U-turn (26th November): A handbrake turn was executed this morning with the document said to have been put on the Government website by mistake, reflecting no more than earlier discussion on the possibility of hiking VAT to 18.5% in 2011. Unfortunately the errant document had, in fact, been signed off by a Government Minister.

The Chancellor now says that ‘there are no plans for the introduction of a 18.5% VAT rate in 2011′. While that’s as may be, there is plenty of time between now and then for such plans to come into being.

Update 18.00 26th November: It has emerged during debate in the House of Commons that the UK Government considered a rise in VAT to 20% before, they say, rejecting it, presumably in favour of the rise to 18.5% from 2011 which seems not to be in the plans today.

The Conservatives have identified a £10 billion hole in the accounts of the Pre-Budget Report prepared by the Prime Minister and the Chancellor. It was delivered to the House on Monday by the Chancellor, to be followed by a damaging series of revisions and retractions, of which this is one.