Increasing VAT to 20% would cost thousands of jobs and put billions of pounds of consumer spending out of the economy, according to the British Retail Consortium (BRC).

The BRC says rising VAT from its current level of 17.5% would result in 163,000 fewer jobs over four years and high street spending would decline £3.6bn.

A study for the BRC by the Centre for Economics and Business Research found that the rise in VAT would cut the deficit by £11bn in the first year but would lead by 30,000 fewer jobs.

"For the first time we have clear, independent evidence showing VAT and NI increases will have a deep and long-lasting impact on jobs and growth," said BRC director general Stephen Robertson.

"The budget deficit is serious. It has to be tackled but proposals must be judged against the implications for jobs and growth revealed by this new information."