Lib Dems propose 5% VAT on fuel

A CLUTCH of new pollution taxes combined with VAT on household fuel at 5 per cent that would meet environmental targets at no extra cost to consumers or business will be proposed by the Liberal Democrats at their conference next week.

Simon Hughes, environment spokesman, said his party 'dared' to speak the 'whole truth' about improving the environment in principles, policies and pounds.

A party document to be voted on at the Brighton conference, Agenda for Sustainability, proposes a widescale shake-up of taxes to help the environment and supports the basic model of stalled European Commission proposals for an energy/carbon tax to tackle global warming. It pledges detailed proposals as part of a costed programme before the next election.

The party has come under repeated fire from the Tories for supporting the proposal, which the Government is helping to block in the Council of Ministers.

Labour also opposes it because it would raise domestic energy prices. Yesterday's paper insists that the cost can be offset by cutting VAT on domestic fuel to the lowest rate allowed under European Union rules - 5 per cent - subsidies for home insulation, better pensions and cold weather payments, compensation for rural residents with little or no public transport and a reduction in employers' national insurance.

The firm commitment to the 5 per cent levy, made for the first time yesterday, contrasts with Labour's refusal to promise to cut it to the lowest permissible level, although the party is campaigning against the planned rise from 8 to 17.5 per cent next April.

The paper proposes a range of other taxes aimed at encouraging changes in business and consumer habits:

A greenfield development tax, aimed to encourage the development of existing derelict sites. This would mean fewer out-of-town shopping centres;

A tax on fertilisers and pesticides;

Charges to drivers for using certain urban roads. The paper opposes motorway tolls, which were 'designed simply to raise more money for the roads programme';

A tax on packaging materials within the UK if pressure for EU action to reduce excessive packaging proves ineffective.

The paper sets targets of cutting emissions of carbon dioxide (the main greenhouse gas) by 30 per cent over 15 years and of sulphur dioxide (the main cause of acid rain) by 70 per cent in five years.