MPs to be consulted on Budget

TREASURY ministers are planning an unprecedented campaign to consult backbench Tory MPs early in the new year on the shape of the Budget.

In a series of presentations, Treasury ministers will invite MPs into the Treasury to hear their views on a Budget in which divisions over whether to curb the budget deficit or provide additional economic stimulus are already emerging.

These consultations will be preceded by the Chancellor's first Budget strategy session on 9 January at his country residence in Chevening, Kent, where Treasury ministers and top Treasury officials will consider the options for the March Budget.

The plan is significant in that MPs are normally only granted token audiences in March, when Budget plans have mostly been set in stone.

Opposition to Treasury proposals for higher indirect taxes is already building up. Despite the deepening concern of Norman Lamont and some top officials over the scale of the Budget deficit, forecast at more than pounds 44bn for 1993/4, some right-wing ministers and their backbench supporters fear the recovery will be too feeble to risk higher taxes by March.

They argue that with the economy still weak and confidence low, tax increases should be deferred until December, when a new Budget will be combined with a statement on public spending.

John Major has already made clear that he wants the Budget to build on the Autumn Statement, with a package of measures to revive manufacturing investment and - despite Treasury resistance - private sector participation in public sector projects, especially roadbuilding.

Popular opposition to plans for higher taxes, such as extending value-added tax to previously exempt or zero-rated categories like domestic fuel, public transport, children's clothes, newspapers and books, may well emerge during the consultations with MPs, despite the parlous state of the public finances.

Other Treasury options for raising revenue include introducing a luxury VAT rate, above the current 17.5 per cent, and higher duty on petrol.

The meetings are being organised by Michael Portillo, Chief Secretary to the Treasury, who in a series of presentations masterminded the selling of the Autumn Statement to the Tory back benches and helped assure a presentational success for the Chancellor when government fortunes were at a very low ebb.