Leading Article: Duty-free pantomime should not mask more vital issues

THE WHOLE business of duty-free shopping is ridiculous, and the sooner it goes, the better. It is depressing that the Government feels it has to indulge in the naked populism of posing as the defender of this pointless subsidy to travellers in order to provide cover for its first tentative strikes against the Eurosceptic press.

From the way some people talk about duty-free, you would think that it was part of a Briton's ancient birthright and that there was a clause in Magna Carta about it. Never mind that it was invented by the Irish as an ingenious subsidy for Shannon airport when long-haul air travel took over from ships. An administrative convenience - it was difficult to tax transactions on board liners - became a simple perk. Now it is one of those distortions of the tax regime which have become embedded long after their rationale is forgotten, and which it is the job of any authority interested in economic efficiency to eradicate.

Ideally, duty-free shopping should be eliminated world-wide, although the logistics of securing agreement on it are daunting (in any case, the more urgent priority is to agree on the taxation of aviation fuel, a more significant subsidy of environmentally damaging travel). In the meantime, getting rid of duty-free within the European Union's single market will benefit poor EU taxpayers who currently have their pockets picked by people who can afford to travel. While it is regrettable when anyone loses a job, the argument that jobs will go has been the last refuge of the conservative through the ages.

However, if the pantomime of British attempts to delay the inevitable is the price that has to be paid for the Prime Minister's more robust attitude towards the Little Englander press, then it is a small price to pay.

Tony Blair's decision finally to speak the truth about the "section of the British newspapers that are vigorously hostile to Europe", as he did on radio yesterday, is a significant step forward. That it represents a deliberate shift is not in doubt, because Jack Cunningham, the Minister for the Message, had just drawn up the charge sheet. Our newspapers are all widely read in Europe, he pointed out. "Giving this impression not only of Britain being isolated but Britain being determined alone to defy the whole of the European Union is totally counter-productive." Quite so. That makes a welcome change from Mr Blair's demeaning and unnecessary toadying to The Sun - especially during the election campaign. And it suggests that the Prime Minister has given up his hallucination that Rupert Murdoch is on the verge of being won over to the European cause.

Of course, not all the mild poisoning of relations in Europe over the past month has been the fault directly of the Eurosceptic papers. Some of the problems have been caused indirectly, by the Government's fear of the anti-European papers. The briefing on behalf of the Chancellor, for example, that he would say "No, no, no" to tax harmonisation and would not hesitate to wield "the veto", did much to annoy Oskar Lafontaine and to elevate the German Finance Minister as the sceptics' new bogey- man.

Intriguingly, Mr Blair's decision to stand and fight coincides with increasing signs of a laager mentality developing among the EU's opponents. Yesterday The Sun praised "our comrades-in-arms over at The Daily Telegraph" in their joint battle to expose yet another European conspiracy to interfere with the rule of British law. Meanwhile the "comrades" themselves presented Mr Blair's stance on Britain's rebate on EU funding in a way that illustrated Mr Cunningham's criticism perfectly. Mr Blair was accused of contradicting himself by both describing the rebate as "non-negotiable", and accepting that it would have to be discussed.

In fact, the Prime Minister's position is entirely reasonable: the rebate is justified because Britain would otherwise be a "net contributor above countries with higher incomes than ours". What prevents the simple alignment of contributions with national incomes is the Common Agricultural Policy; until the Cap can be abolished - or at least radically reformed - Margaret Thatcher's rebate will have to stay.

In the end, the argument against the Eurosceptics will be won by the deployment of reason rather than of spin. The logical alternative to the Prime Minister's policy of constructive engagement is Britain's withdrawal from the EU - and, even if we do disagree with some of our partners' ideas for the future of the union, there is nothing that justifies cutting ourselves off from the whole enterprise. It is to be hoped that this week marks a stiffening of Mr Blair's resolve, a determination not to take fright at every passing newsprint shadow.

In Vienna this weekend, we trust he will discuss the issues of EU funding, tax competition and the euro on their merits and give us less of this nonsense about defending cheap cigarettes and alcohol.