Home broadband prices are set to rise as a result of the government's decision to increase VAT.

The tax has been put up to 20 per cent from 17.5 per cent as of today (January 4th 2011), with the change affecting a wide range of goods and services as well as broadband bundles.

It comes just 12 months after the VAT rate returned to 17.5 per cent from 15 per cent, with the Labour government hoping the temporary reduction would encourage greater consumer spending.

Recently-installed Labour leader Ed Milband has criticised the hike, warning the move could put too much strain on households across the UK.

"When family budgets are already squeezed, now is not the time for a VAT rise to make it even harder to make ends meet," Mr Miliband remarked.

However, chancellor George Osborne described the tax as a "powerful weapon to tackle debt" and insisted the spending cuts would have been £13 billion larger if this step was not taken.

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