Inside Parliament: Cannes tax-cut promise beached

Kenneth Clarke, the Chancellor, yesterday distanced himself from tax promises made by John Major three weeks ago as he tried to bolster his prospects in the Tory leadership contest.

In a manifesto hurried out from Cannes after John Redwood launched his challenge, Mr Major said he wanted to abolish capital gains tax and inheritance tax.

But pressed in a Commons debate on the economy, Mr Clarke downgraded abolition of the taxes to a "long-term aim" of the Conservative Party. "The Prime Minister does belief that it should be reasonable to get rid of capital gains tax (CGT) and inheritance tax as well."

Inheritance tax was "extremely uneven" in the way it fell and CGT bore "quite heavily on some forms of investment". But Mr Clarke went on: "The Prime Minister has given no commitment about when we might achieve such an ambitious objective."

Gordon Brown, the shadow Chancellor, said the Government had broken its tax promises to the living and was now breaking its promises to the dead. The manifesto issued by the Prime Minister at a "wobbly" stage of the leadership contest was simply a group of uncosted spending promises, Mr Brown said. Abolition of CGT would cost pounds 1.65bn rising to pounds 3bn a year, but 50 per cent of the benefit would go to only 2,000 people. Getting rid of inheritance tax would cost pounds 1.4bn with a tiny number of estates getting most of the benefit. Other "uncosted spending promises" were tax relief for home-buyers and community care.

"This Conservative Party has made pounds 11bn of uncosted spending promises in 11 days - pounds 1bn a day - and just to secure the Prime Minister's re-election as leader of the Conservative Party" Mr Brown said.

"When the choice has to be made about the spending priorities in this country, it should not be tax cuts that are geared to the very wealthiest, based on the abolition of inheritance tax and capital tax. If any government is going to be serious about justice and fairness , it must deal with the problems of education and of health and of our public services as well as a proper deal for middle- and lower-income Britain in tax."

Mr Clarke mocked his shadow as a "tartan Trappist monk" with nothing to say on the substance of economic policy. "New Labour" was a "hollow sham, devoid of any principle or purpose".

He said the Treasury's summer economic forecast showed "we remain on course to deliver sustainable growth". And on his recent decision not to put up interest rates despite pressure from the Bank of England, he said there was no need to react too strongly to the recent "slowdown in activity". It was "merely a change of pace in a continuing running recovery".

However, John Townend, chairman of the Tory backbench finance committee, raised the lack of a "feel-good factor" and warned that tax rises were the Government's "Achilles' heel".

The Bridlington MP offered a long list of areas for savings, including cutting the overseas aid budget, rapid repatriation of illegal immigrants and pulling British troops out of Bosnia.

The unease of many Conservative about deeper military involvement in Bosnia was summed up by John Biffen, who bid Malcolm Rifkind, the new Foreign Secretary, heed the wisdom of Bismark that the Balkans were "not worth the bones of a single Pomeranian Grenadier".

It was incumbent on the Government to make the most realistic assessment of Britain's military position in Bosnia and what it sought to fulfil, said the former Cabinet minister after a statement on the fall of the Srebrenica safe area to the Bosnian Serbs.

Mr Rifkind replied: "While we certainly take the view that there is no justification for the UK becoming involved as a combatant ... we believe there is an obligation on this country and upon other countries to do what can be done to help save lives and reduce the nature of the conflict." He spelt out to MPs the Government's determination to see Srebrenica restored as a "safe area", but said the withdrawal of British troops "must remain an option" while the conflict escalated.

Pressed by David Clark, Labour's defence spokesman, on the French desire for a "much more robust military approach to the retaking of Srebrenica", Mr Rifkind said Rapid Reaction Force troops would have to traverse 170km of Serb-held territory to reach the town. "Mr Clark must reflect on whether that is a realistic obligation to impose on them."

The most hawkish noises came from the Labour benches, with Andrew Faulds, MP for Warley East, urging the Government to ask the British troops in Gorazde if they wanted to take action against the "criminal activities" of the Serbs. "Because if the Government hasn't got them, those chaps have certainly got the guts and the balls to do it."

Sir Patrick Cormack, MP for Staffordshire South, was virtually the only voice raised on the Tory side advocating more robust action. "What is at stake isn't just Bosnia, and not just the poor innocent civilians fleeing, but the credibility and the authority of the UN itself.

"If this gang of brigands, Karadic's Serbs, get away with cocking a snoop at the international community, this is a recipe for international anarchy," he said.

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