Double VAT on fuel denied

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Kenneth Clarke last night denied any Tory plan to double the VAT on domestic fuel and power bills, after Grocer magazine had reported him saying that was his next "challenge".

The Chancellor was approached by the magazine's features editor, Yvette Murphy, after a dinner held by the British Retail Consortium last week. She asked him about his plans to put VAT on food and when he said that there were no such plans, Mrs Cooper reminded him that the Conservatives had said the same about VAT on fuel before the 1992 election.

Mr Clarke is reported to have replied: "That move was necessary, and the challenge now is to get the rate up to 17.5 per cent."

Woken by the Treasury during a trade mission visit to Peking last night, the Chancellor said: "I gave no statement of intention on VAT on fuel to Grocer magazine. I have accepted the view of Parliament that VAT on fuel should remain at 8 per cent."

Mrs Cooper and her editor, Clive Beddall, last night stood by the report, although she had no tape-recording or contemporaneous note of the exchange. She told The Independent that as soon as the conversation had ended she went to the nearest table and made a note of what the Chancellor had said.

Peter Butler, the Chancellor's parliamentary private secretary, said he had been with Mr Clarke at the time "and he never said anything of the sort. She has clearly misheard."

However, the latest edition of the Conservative's definitive campaign guide says that a greater proportion of revenue-raising measures have been deliberately switched from direct taxes like income tax, to indirect taxes like VAT. "This has increased personal freedom," it says, "by leaving people with more of the money they earn, to spend or save as they choose."

The Conservative decision to impose VAT on fuel was announced by Norman Lamont in his 1993 Budget, when he said that 8 per cent would be added to bills for 1994-95, with a second, staged increase to 17.5 per cent from April 1995. In the event, the second strike was defeated by the Commons late in 1994. Gordon Brown, the shadow Chancellor, has pledged that the rate would be reduced by a Labour government to the minimum 5 per cent that was allowed by European Union regulations.