No one should be surprised if the VAT rate is increased, since the budget deficit needs to be addressed and there is a limit to how quickly costs can be cut. That is the view of Marc Welby, head of VAT at BDO Stoy Hayward. His comments come in the wake of stories - since denied - that the Conservatives would raise the tax to 20% were they to be elected next year. The move was expected to raise about £10bn a year. Welby said: 'With most commentators considering that the case for raising taxes in the medium terms has now been established, the only remaining questions are which taxes and by how much. 'VAT is perhaps an obvious candidate as it would raise substantial revenues and a VAT rate of 20% would bring the UK much closer to the EU average of 19.5%'. He added: 'Furthermore, with the zero rate for most food and children's clothing, the reduced rate for domestic fuel and power and exemption from VAT for housing rent, spending by lower income groups should be less impacted than might otherwise be the case, although some element of compensation to lower income groups may still be considered appropriate.' In the last Budget, VAT was reduced to 15% but is due to return to 17.5% in the New Year.