BILLIONS of pounds could have been raised had the Chancellor taken decisive tax measures instead of gaining relatively little by penalising the richest segment of society, experts from PricewaterhouseCoopers (PWC) said yesterday.

Alistair Darling surprised analysts by not enforcing a widely-expected rise in VAT, which PWC calculated could have yielded an annual £9bn from a two per cent rise and £20bn in a five per cent rise.

But instead, alongside measures including raising income tax to 50 per cent and reducing tax relief on pensions for people earning more than £150,000, experts from PWC’s office in Newcastle said Mr Darling was hoping to pick up the shortfall through his predictions for recovery by 2011, by which time he predicted the economy would grow by 3.5 per cent.

Tax director Carol Chleboun said increases penalising high-earners could even dissuade international companies from setting up in the UK.

She said: “The move in terms of pension contributions will raise relatively little money and, in real terms, makes us uncompetitive in the G20 as far as wealthy executives are concerned – we go from being 13th to 18th.

“The reality is that senior executives will choose to work elsewhere and may choose not to base their headquarters in the UK.”

She said the Chancellor was hoping measures such as raising redundancy pay and pledging more help to the long-term unemployed will give people the confidence to spend and will give businesses the courage to invest and create jobs.

She said: “He is almost nudging us towards recovery, instead of taking the decisive measures many expected.”

Paul Dixon, a tax manager at PWC, said he was surprised at the lack of decisive revenue- raising measures.

He said: “It was hard to see how he could effectively address the downturn without raising a lot more revenue, which he has not done.

“Large revenue-generating measures like raising VAT were not taken, and while I half-expected at least a couple of really big headline measures to tackle the economic situation, they did not come.”

He also said he was concerned over the possibility of North-East job cuts as a result of the planned £5bn savings in the public sector, and added: “This area is very heavily dependent on the public sector in terms of employment.”