Conservatives and Labour deny they are planning to put VAT on food

LABOUR and the Conservatives yesterday denied they were planning to raise VAT and impose the tax on food after newspaper reports claimed that Whitehall officials were informally discussing the possibility as a means of reducing Britain's record national debt.

The Treasury issued a denial that any such move was being planned under Chancellor Alistair Darling, and Secretary of State for Children, Schools and Families Ed Balls said he did not expect a VAT rise under Labour.

But Mr Balls – formerly Gordon Brown's chief economic adviser – said the reports raised questions over whether shadow chancellor George Osborne was planning to use VAT hikes to fulfil his pledge to reduce the UK's deficit deeper and faster than Labour.

He pointed to comments made by economist Sir Alan Budd – expected to head Mr Osborne's Office for Budget Responsibility if the Tories win power – that the Conservatives will need to raise taxes as well as cut spending if they are to achieve their ambitions on reducing debt.

Mr Balls said his "expectation" was that there would be a Budget before the general election, but he declined to comment on speculation that it will be held on 24 March, insisting that the date was a matter for the Chancellor.

In a TV interview, he said: "My expectation is that there will be a Budget, but my expectation is that under a Labour Budget, there won't be a rise in VAT or an extension of VAT to food, as we read is being planned for potential future governments.

"The question will be, 'Is George Osborne planning a rise in VAT or an extension in VAT to food to make up some of the gaps in their finances?'"

A spokesman for the shadow chancellor said: "This is absolute nonsense. We have never had any discussions on this, therefore it must relate to government plans.

"Labour are the only people who have drawn up plans for a VAT increase and this is a desperate attempt by Ed Balls to distract attention from that."

Tories pointed to a Treasury admission that a VAT rise to 18.5 per cent in 2011-12 had been considered at the time of the 2008 Pre-Budget Report.