Leaders clash over 'VAT bombshell'

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At Commons question time, Mr Cameron said the country was "going bankrupt," the Prime Minister had been "found out" and new Labour was "dead".

But Mr Brown said ministers had rejected the option of raising VAT above 17.5% because hard-pressed families had been hit by such a move in earlier decades.

In their final Commons clash before next week's Queen's Speech, he accused the Tories of having abandoned "compassion" by offering no help to families hit by the recession.

"You are the do nothing leader of a do nothing party," Mr Brown told the Opposition leader during rowdy exchanges.

Chancellor Alistair Darling's Pre-Budget Report on Monday sparked stormy scenes on Wednesday ahead of an emergency debate on the rescue package granted to the Tories.

Launching his attack, Mr Cameron demanded: "If the Government doesn't have a secret plan to increase VAT, why did the Treasury minister put his signature to it?"

Mr Brown said: "We looked at every option over the last few weeks, including options taken up by the last Conservative Government. And we rejected the proposal to raise VAT in favour of a proposal to lower VAT.

"We looked at the 1980-83 recession and when the Conservatives raised VAT from 8% to 15% hard working families were hurt. We looked at the 1990s and when the Conservatives raised VAT from 15% to 17.5% hard pressed families were hurt. And when you were adviser to the Treasury they tried to raise VAT on fuel to 17.5%

"We looked at all options. We rejected the option of raising VAT. We decided we would lower it and we hope the Conservative Party will support us."