Osborne: VAT hike here to stay

LONDON, Jan. 4 (UPI) -- Increasing the tax Britons pay for welfare benefits is more harmful than the hike in the value added tax, the chancellor of the exchequer said Tuesday.

George Osborne told the BBC taxing consumption is more progressive than taxing earned income.

"I didn't come into politics and become chancellor of the exchequer wanting to increase taxes. I'm actually someone who believes we want to try and lower taxes in this country," he said. "But when you've got a very large budget deficit and you've in the middle of a European sovereign debt crisis -- and you've decided that at least part of dealing with the deficit has to come from tax rises -- then I think VAT presents itself as the choice."

Osborne said he expects the increase in VAT to 20 percent from 17.5 percent to be "permanent."

Ed Miliband, the leader of the Labor Party, argues the government should deal with the deficit by increasing income tax and National Insurance payments. He said the increase in the VAT hurts poor families hardest.