`Save duty free' campaign dealt blow by EU report

THE EUROPEAN Commission will deliver a blow today to the campaign to save duty-free sales by disputing claims from the European Union's biggest members that abolition will cause massive job losses.

Drafts of a report, prepared by commission officials, conclude that an extension to duty-free sales would produce "both economic and legal obstacles" and would be a "disproportionate answer to the identified problem".

Ferry companies have warned hundreds of jobs could be lost and fares would rise if they lose their unique trading advantage of duty-free sales.

The campaign to save duty-free sales was taken up by the Deputy Prime Minister, John Prescott. It was supported by Germany and France but Brussels commissioners are today expected to reject extension after a review by officials and a report by Mario Monti, the commissioner for the internal market.

It could bring an end to duty-free sales from 1 July. A senior commission source said Britain would need unanimous backing to overturn the earlier commission decision to stop duty-free sales, and that was unlikely. Denmark is believed to be holding out against pressure from the campaigners, and Belgium is also among those classed as "doubtful".

Mr Prescott said last night that Britain attached "the highest political importance" to getting a better deal for duty free. "We must look carefully at this new report from Commissioner Monti but if it does not offer an extension of duty free it does not go far enough. We are looking both for a significant extension to the current arrangements and urgent work to develop a better successor regime," he said.

The decision will be a blow for Tony Blair, who wrote to European leaders urging them to support the campaign. The supporters warned that unless ferry companies were allowed to continue making profits from duty-free trade, they may have to raise prices by at least 10 per cent. Air fares could also be effected.