Blair isolated as Labour backs pounds 10,000 rise

Emphasising that Labour was allowing a free vote, Ann Taylor, shadow Leader of the House, rejected the advice of her own party leader, Tony Blair, to stick to 3 per cent, and backed a pay package giving MPs a rise of 26 per cent.

Mr Blair, who had supported a call by John Major for MPs to limit the rise to 3 per cent, was isolated by the rest of the shadow Cabinet as MPs on all sides voted to reject pay restraint.

Gordon Brown, the shadow Chancellor, and his Treasury team, were among the few Labour front benchers to support the 3 per cent limit. The Cabinet turned out in force except for Michael Heseltine, the Deputy Prime Minister, who was attending a function with Nelson Mandela, the South African President, Michael Forsyth, the Secretary of State for Scotland who was in Scotland, and the Secretary of State for Wales, William Hague, who was in Korea.

The Government was accused of "blackmail" by angry Tory backbenchers after offering to preserve a higher rate for MPs' car mileage in return for cutting a recommended 26 per cent pay increase to 3 per cent.

Tony Newton, the Leader of the House, was repeatedly interrupted by Tory MPs as he tried to persuade the Commons to heed the Government's appeal for pay restraint and to reject the recommendation by the Senior Salaries Review Body to increase their salaries from pounds 34,085 to pounds 43,000.

In what was seen as a clear attempt to divide and rule the House, Mr Newton said MPs could keep their existing mileage allowances, allowing up to 74p a mile up to 20,000 miles a year for larger cars, providing they voted for the 3 per cent limit on their pay.

Ms Taylor attacked Mr Newton's approach as "absolutely astonishing" and "offensive". She said it would send a message that MPs should restrain their pay "and milk the mileage".

"I don't believe that we should be trying to cherry pick the recommendations," she said. "The only way to get this issue out of our hands is to vote for the SSRB recommendations."

Mr Newton said the Government could not escape the responsibility for telling MPs to limit their pay to the public sector norm of 3 per cent. "We have successfully constrained public sector pay to reasonable levels. This is one of the policies that has contributed to falling unemployment, and faster growth.

"The question the House has to answer is how can we ask restraint of others without asking restraint of ourselves."

But splitting the pay deal and the car allowances infuriated MPs. John Carlisle, the Tory MP for Luton North, who declared an interest in a car dealership which has supplied some MPs, said MPs would face financial hardship if they lost their mileage allowances next year. "This is a blackmail tactic," Mr Carlisle said.

Nicholas Winterton, the Tory MP for Macclesfield, said it was "quite obscene, and immoral and wrong" that MPs with smaller cars should be able to make a profit from their allowances while those with larger cars living a long way from London would be subsidising them.

"This House should show courage and do what it believes to be right however difficult that might be. It is ridiculous to have a Senior Salaries Review Body only for the Government to disregard it with gay abandon," Mr Winterton said.

MPs were portrayed as "Dickensian money grabbers", warned Dale Campbell- Savours, the Labour MP Workington. He called for wage restraint by staging the increase over three years. "My strategy is to block the pounds 43,000 because I think it is wrong."

But Sir Terence Higgins, the Tory MP for Worthing, and a former Treasury minister, said MPs had exercised pay restraint for 30 years and there was little evidence anyone had followed their example.

"Ordinary members are not going to remain in this House at the level of pounds 34,000 a year. It is absolutely ludicrous. The performance of the House is being undermined by what the Government is proposing.

"There is a very real danger we do not take this decision we will see a deterioration of the quality at ministerial level. I suspect we shall not have another chance for this."

Peter Bottomley, the Tory MP for Eltham and husband of the Secretary of State for National Heritage, Virginia Bottomley, said he had once faced the prospect of "going broke or going out. We need to divide between the King's men, the cowards and the courageous. We should be courageous."

A warning that Parliament would not attract people of the right calibre was also delivered by Sir Tim Sainsbury, the Tory MP for Hove, a former minister and director of the supermarket chain.

Labour's Chris Mullin said there was no shortage of candidates for MPs' seats.