Major rounds on Blair over food tax claim

Tony Blair and John Major clashed in the Commons yesterday over Labour claims that the Tories would impose VAT on food after the election.

The claims raised the temperature of pre-election campaigning and led to Tory charges that Mr Blair was indulging in "lies" and negative campaigning. "What you are seeking to do is smear our plans for the next Parliament. It simply won't wash," Mr Major told the Labour leader.

Kenneth Clarke said on BBC radio that the idea of imposing VAT on food "never crossed my mind". He added: "I don't expect to live to see the day when any government puts VAT on food in this country."

Labour's claim was described as a "lie" and a "pathetic stunt" by Dr Brian Mawhinney, Chairman of the Conservative Party.

But neither the Prime Minister nor the Chancellor gave a commitment not to charge VAT on food or other zero-rated goods. Mr Clarke wrote to Alan Milburn, a Labour Treasury spokesman, last month saying: "I have never made a promise not to extend the scope of VAT ..."

Ministers hoped Labour's attack would bounce harmlessly off the Government. But Labour's target was the issue of trust in the Government and Labour strategists believe the VAT attack could prove deadly.

Mr Clarke denied any lapse of memory about VAT. "The [1992] manifesto did not say we weren't going to extend it and I have never said we weren't going to extend it," he said.

In fact, Mr Major said the Government had "no plans" to raise VAT, before imposing it on domestic fuel, which had been zero rated.

Labour stood by its claims and issued chapter and verse on the Chancellor's commitment to expanding the VAT base.

In his 1993 Budget, Mr Clarke said: "The Government's clear policy has always been to shift the burden of taxation over time from income to spending. This reflects the Government's underlying political philosophy that people should be allowed to keep as much of their own money as possible...It is fairer and less damaging to the economy to tax people on how much they spend and consume than on the work they do."

Commentators, said Mr Clarke, had correctly suggested that "one of my options must be to extend the VAT base. The main candidates are food, children's clothes, transport, sewerage and newspapers. A powerful case for each of them can be made and no amount of lobbying need put us off."

The Chancellor then said he had no need to increase or widen VAT in his 1993 Budget. But his commitment to widening the VAT base remained.

t The Government admitted last night that there is a pounds 400m hole - enough to build a new hospital - in the public finances because of errors in November's Budget.

Mistakes were made in estimates for the amounts expected to be raised by increases in air passenger duty and insurance premium tax.

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