Party leaders clash over 18.5 percent VAT plan

By Tim Castle

LONDON (Reuters) - Gordon Brown and David Cameron clashed in the Commons on Wednesday over the revelation the government had considered raising Value Added Tax to 18.5 percent after the next election.

Conservative leader Cameron said the inadvertent publication of a pre-budget report document detailing the rise showed Prime Minister Brown was planning a "VAT bombshell."

Brown confirmed the rise was one of a number of options studied but said the government had rejected the idea because it would have hit hard-pressed families.

He accused Cameron of being a "do-nothing leader" who would leave families without support in an economic downturn.

On Monday, Chancellor Alistair Darling announced a 2.5 percent point cut in VAT to 15 percent as part of his pre-budget plans to pump 20 billion pounds into the economy to avoid a steep recession.

Printed notes accompanying the announcement confirmed that the standard VAT rate would return to 17.5 percent from January 2010.

But an electronic version of the notes published on the Internet added that the rate would "subsequently rise to 18.5 percent in 2011-12."

The Treasury said the Internet publication was an administrative error and did not reflect government plans.