VAT rise

The rise in VAT was dominated the first political exchanges of the year.

In a series of interviews yesterday, chancellor George Osborne suggested the rise from 17.5% to 20% would be permanent.

Any later tax cuts once the deficit reduction period was over would probably come in the form of income tax.

Opponents of a VAT rise say it is regressive, because it taxes rich and poor equally on each item they purchase. But advocates claim it can be progressive, because the rich tend to pay more as a result of purchasing more items.