Increase in the reduced VAT rate

Another option for the Chancellor will be to increase the reduced rate of VAT from 5% to somewhere near the EU average of 8%.

An argument that the VAT rates should be brought into line with the rest of Europe might be used. Another argument is that in the UK a large number of goods and services are taxed at the zero-rate anyway, in contrast to the rest of the Member States, which in the main do not have a 'zero-rate'.

The Czech Republic has recently increased both its standard rate (19% to 20%) and reduced rate of VAT (9% to 10%) at the same time (01/01/10).

The UK has the lowest possible reduced rate permitted under EU law (5%).

So, if the Government did raise the rate to around 8%, it would seem more likely that it would add the repair and maintenance of dwellings into the category (see addition of more goods and services into the reduced rate ).