One of the region's leading VAT authorities has said that even without the UK's deficit, the rate of VAT is "sure to increase".

Jason Croke, VAT Consultant at the Birmingham and Wolverhampton offices of Haines Watts, says that a post-election increase by at least two percentage points is on the cards. VAT was untouched in the recent Budget.

"VAT is increasing across Europe. Currently, at 17.5% the UK enjoys one of the lowest rates in the EU. Only Luxembourg, Cyprus, Madeira and the Azores come in lower - at 15%. Spain, currently at 16%, will be going up to 18% from 1st July this year. Meanwhile, Sweden, Hungary and Denmark are already at 25% - the highest it can go under EU law."

Finland, Greece and Spain have announced VAT increases in 2010 whilst Estonia, Hungary and Lithuania increased their VAT rates in 2009.

"The overall trend is up and a small increase in our rate by between 2 and 2.5% would keep it in line with the majority of our European neighbours. The reduction in rate of 2% last year had negligible impact on consumers - so it might be expected that an increase will be pretty much the same. It's the press and political commentators that will make a field day out of it," said Mr Croke.

VAT was first introduced in Britain in 1973 at a standard rate of 10% and the following year was reduced to 8%. Four months later a higher rate of 25% was introduced on petrol, subsequently reduced to 12.5%. In Margaret Thatcher's government, a unified rate of 15% was introduced.