Key committee urges Major to sack Chancellor: Tory members missed crucial votes as Lamont's record came under attack

THE Prime Minister was urged to sack Norman Lamont as Chancellor of the Exchequer and replace him with someone inspiring more public trust in a damning Commons report on last month's Budget, agreed last night by the Tory-led Treasury select committee.

The highly critical and embarrassing report was pushed through by a Labour and Liberal Democrat majority - in the absence of some Conservative committee members.

Two Tory members of the committee did not turn up and another was so late that he missed key votes. One Labour MP said: 'We therefore passed some amazingly tough stuff. It's another case of Tory incompetence.'

Even so, one section of the report, on what was described as the Government's policy of phasing-out mortgage interest tax relief by stealth, was said to have been agreed unanimously, with neither of the two Tory members present, Nigel Forman or Barry Legg, voting against. John Watts, the Conservative chairman, does not vote unless there is a tie.

In his Budget, Mr Lamont gave notice that mortgage interest tax relief would be restricted to the 20 per cent income tax rate from April next year, yielding pounds 820m in the next financial year, and pounds 870m in 1995-96, further squeezing the politically sensitive relief. Nigel Lawson restricted the relief to homes rather than people, and in Mr Lamont's first Budget in 1991 relief was limited to the 25 per cent basic rate of tax, costing an estimated 860,000 higher-rate taxpayers pounds 420m in the financial year 1992-93.

The ceiling for relief was last increased - from pounds 25,000 to pounds 30,000 - 10 years ago and the Treasury select committee believes that freeze, together with the shrinkage of the relief rate, amount to a de facto phase-out. The committee called for that policy to be made explicit.

But the biggest embarrassment of the report, to be published on Monday, was the criticism of Mr Lamont. It is expected that the committee report will return to allegations that the Chancellor ordered Treasury officials to 'massage' statistics on the growing public sector borrowing requirement before last year's election.

Mr Lamont told the committee, in evidence, there had been no impropriety, but some members were clearly not satisfied by his response to allegations that statistics had been falsified.

Those allegations, taken together with the withdrawal of sterling from the Exchange Rate Mechanism on 16 September last year - in breach of all the Chancellor's previous protestations - led the committee to the conclusion that his statements increasingly lacked credibility and that the Prime Minister should consider his replacement by someone inspiring greater City and public coinfidence.

One Labour committee member said: 'Yes, it is a one-day wonder, but it is severely embarrassing that such a report should be passed by the most senior departmental select committee of the House.' '