Major abandons his VAT promise

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The Independent Online
JOHN MAJOR prepared the ground yesterday for a possible extension of value-added tax to newspapers, fares, food or children's clothing, something he had previously said was unnecessary. Both the Prime Minister and Kenneth Clarke, the Chancellor, refused to repeat earlier promises to retain zero-rating.

Labour claimed the Tories had dropped 'another tax bombshell'. Gordon Brown, the shadow Chancellor, promised that a future Labour government would not extend the tax to those items, but shrank from promising any cut in the rate of VAT on domestic fuel.

Questioned on yesterday's BBC Election Call phone-in, the Prime Minister said: 'I can't rule things in and I can't rule things out. That is not a suggestion that it is going to happen. No Chancellor will indicate in advance what is likely to be in his Budget. . . . We have no plans to do so . . . those are matters that Chancellors have to look at in the future.'

Mr Major said during the 1992 general election campaign: 'I've made the pledge in the past. We have no plans and no need to extend the scope of VAT.'

Mr Brown said: 'Having made absolute, unconditional and personal promises at elections, both Mr Major and Mr Clarke are now attempting to change ground.'

Harriet Harman, shadow Chief Secretary to the Treasury, said extending VAT was the Tories' 'hidden agenda'.

Labour yesterday reiterated its constant theme that VAT is an unfair tax that hits the poorest because it takes no account of income. Mr Brown's refusal to make any commitment to cutting the rate on fuel constrasts with an indication from the late John Smith in a 10 March interview with Grampian television that a future Labour administration would try to reduce it.

While a binding undertaking given by Norman Lamont, when he was Chancellor, bars the restoration of zero-rating once abandoned, European Union rules allow for cuts down to 5 per cent. Such a reduction from the 17.5 per cent due to apply from next April would cut revenue by more than pounds 1.5bn a year, potentially increasing pressure for spending cuts or higher direct taxes.

Mr Brown stonewalled reporters' questions at a London news conference, saying: 'Other policy decisions will await our election manifesto.'

Howard warning, page 6

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