I will raise tax despite rebels - Clarke

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The Independent Online
Kenneth Clarke, the Chancellor, last night stepped up efforts to prevent a backbench rebellion tonight by warning that he will bring in emergency tax increases or spending cuts if he is defeated over value-added tax on domestic fuel.

As Mr Clarke came under fresh pressure to make last-minute concessions to secure the second-stage VAT increase to 17.5 per cent, he said he would seek to amend the Finance Bill, which puts last month's Budget into effect, if the ''extremely foolish'' revolt killed the VAT increase.

The Chancellor's warning came as a further Tory backbencher, David Sumberg, joined at least a dozen who have indicated they could abstain or vote against the Government on a Labour procedural amendment seeking to reopen the issue of VAT on fuel. Mr Sumberg, normally a government loyalist, told the Commons last night he would vote against the measure.

Mr Clarke declared in Brussels after a meeting of European finance ministers that the ''shape of the resulting Finance Bill would change'' if the Government lost the vote. In a clear hint that he was ready to find other ways of making up the pounds 1.5bn shortfall in revenue that would be left by a defeat, he added: ''We would alter the balance of revenue raising and public spending required to keep us on course for a sustainable recovery.''

The Chancellor insisted he still expected the Government to win tonight but added: ''The House of Commons would make itself extremely foolish if everyone, having more or less endorsed most of this Budget, decided, because revenue raising is unpopular, to opt out of a measure Parliament approved of last year. It isn't even in this year's Budget.''

Mr Clarke in effect served notice that he is ready to follow the strategy adopted in 1981 by the then Chancellor, Lord Howe, who as author of the tax-raising Budget of that year was defeated by backbench support for a Labour amendment which deleted a planned pounds 135m-a-year increase in diesel duty. Lord Howe came back two months later with a proposal to put 3p on a packet of cigarettes and similar increases in bingo and betting tax.

Under the worst-case scenario of government whips a dozen MPs could deprive the Government of the measure merely by abstaining if all the Opposition parties muster a full turn-out and the ailing Sir Nicholas Fairbairn and Geoffrey Dickens - both of whom are known to have strong reservations about the increase - fail to turn up.

Ministerial hopes that some of the nine Ulster Unionist MPs - who have indicated strong opposition to the VAT increase - might stay away for tonight's knife-edge vote were undermined by indications that their leader, James Molyneaux, had ordered a three-line whip. James Kilfedder, Popular Unionist MP for North Down, is also expected to oppose the Government.

While some potential abstainers may well end up supporting the Government, ministers face the threat that at least three Tory MPs, Nicholas Winterton, Paul Marland and Mr Sumberg, could vote with Labour. Sir Richard Body and Richard Shepherd - two of the MPs who lost the whip for their part in last week's rebellion against the European Finance Bill - were also said to be considering outright opposition. Sir Andrew Bowden suggested he might be forced to rebel in the absence of further compensation for elderly VAT payers.

The Shadow Chancellor, Gordon Brown, sought to step up opposition to the VAT increase by exploiting the publication of a separate statutory order imposing VAT on limited transport services, including buses between airport car parks and termimnals and vehicles taking visitors around zoos and amusement parks.

Paying the price, page 2

On the doorsteps, page 9

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