The Budget: Tories divided on Lamont's future: Decision to phase tax increases may save Chancellor

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Indy Politics
RUMBLINGS of discontent emerged on the Government back benches yesterday over the imposition of 17.5 per cent VAT on domestic fuel bills in 1995.

Underlining the growing concern, the cross-party Commons Select Committee on Social Security is expected to launch an inquiry into the methods of assisting those on low incomes now being studied by social security ministers.

While the 'jury' was still out on Norman Lamont's position, there appeared to be growing recognition that he had made his future more secure by phasing tax increases.

Tory MPs said they were braced for a backlash in local by- elections around the country today. Some suspect the Chancellor is hoping that higher-than- forecast growth will enable him to avoid carrying out the threat. But MPs on the right-wing were disappointed that he did not increase taxes in the coming year.

'It was a Budget to save his neck, and I think that was reprehensible,' one member of the Government said. 'There should have been tax increases this year. As far as I am concerned, he's finished.' He added that the delay in implementing the full rate of VAT on fuel would mean the Government would be 'beaten around the head' for months. It was 'bad politics', he said.

Those views were diametrically opposed by another Government member who insisted it was not possible for the Chancellor to immediately attack the deficit without risking recovery. 'People would have said, 'the recovery is just starting; what are you doing taking money from people's pockets'.'

It was an 'extremely ingenious' budget, he added. Now that many Tory MPs had read the small print - on the VAT threshold for small firms, for example - they liked it, he said.

Those who said within hours of the Budget that Mr Lamont would not survive were holding to their view, but there was nevertheless a growing feeling that he would survive, to the dismay of his detractors. 'He's got to go. He's not got the confidence of the City,' one senior member of the 1922 Committee said.

Having delayed the tax increases, there was growing support for deep cuts in public expenditure in the 'unified' Budget in the autumn.

John Townend, chairman of the Tory backbench finance committee, said: 'I shall be pressing for a tougher line on public spending in December. I am pleased with the medium-term strategy. His personal position is much stronger.'

Nirj Deva, the Tory MP for Brentford and Isleworth, said: 'The Chancellor has positioned himself uniquely by basing his tax needs on the assumption of growth, which may turn out to be too modest. If the economy grows faster, he could come back next year and say, 'Hang on; I over-estimated my tax needs for the deficit and I am now able to give back something'.'