In March, EEF called for VAT to rise to 20% as part of tax reforms designed to rebalance the economy.
Today, the BBC released a poll showed that 24 of the 28 independent economists that help guide HM Treasury forecasts believed VAT is likely to rise as part of the package to cut the deficit. The IFS - which exposed the massive holes in the parties' pre-election budget plans - also expects VAT to go up.
And a closer look at the coalition agreement between the Conservatives and the Liberal Democrats suggests the new government has left the door open to a VAT rise.
But why a VAT rise?
To help rebalance our economy, we need to look at where the balance of the tax burden lies. Currently, the VAT rate in the UK is below the EU average, and typically, VAT rises are less damaging than other taxes - a slightly higher tax rate on spending will help shift our economy away from debt-fuelled consumption, while higher taxes on investment or profits simply punishes productive companies trying to grow and invest in the UK.
UK tax mix 1978-79 to 2008-09
Source: Reform (2010) Reality Check: Fixing the UK's tax system
What the Reform chart shows is that over the last decade, relatively more of the UK's tax receipts have come from taxes on earnings and profits, and relatively less from consumption (indirect) taxes.
This shift in tax receipts will have reinforced the economic trend towards debt-fuelled consumption: households need to supplement higher taxes with borrowing to finance relatively lightly taxed consumption.
EEF's recommendation of a 20% VAT rate from 1 January 2012 would accomplish two goals.
Firstly, it would provide a boost to spending before the VAT rise, helping to reinforce the recovery through 2011.
It would also raise almost £12 bn a year.
That revenue could - and should - be used to rethink and realign priorities for public sector spending cuts. In particular, the government could offset some of the economically damaging cuts to capital budgets built into the last government's plans and ignored during the election.
The coalition government can either find ways to repair the public finances by cutting into economic muscle, or do it in ways that boost growth at the same time.
We think a VAT rise is not only needed to raise revenue, but is also economically rational to help rebalance the economy.