Brown rejects fuel tax demands

Support for blockades is "ambiguous", says Straw

Chancellor Gordon Brown set the stage for a battle of wills with fuel protesters after he explicitly ruled out cuts in duty on the scale demanded.

He said campaigners' demands to cut duty by 26p a litre were "unaffordable" and would lead to higher interest and mortgage rates.

In a speech to the Confederation of British Industry conference in Birmingham the chancellor hinted of concessions to come in his pre-Budget statement on Wednesday.

Chancellor hinted at concessions

But ministers argue that giving in on fuel taxes would mean penalising other groups like pensioners.

Mr Brown told the CBI: "Britain can grasp the great interest rate prize that has eluded us for a generation - a long-term future of low and stable interest and mortgage rates upon which people can rely and business can plan ahead.

"But this would all be put at risk if unaffordable demands such as for cuts in fuel duties of up to 26p were met on Wednesday with interest rates rising soon after."

Pre-emptive strikes

Downing Street fired a series of verbal warning shots at campaigners contemplating a second fuel blockade.

Sources at Number 10 highlighted warnings from industry leaders who, they said, had threatened to take out injunctions preventing lorry drivers from blockading key motorways.

The sources also pointed out that airports received supplies of fuel by pipeline direct from refineries so that any attempt to cause chaos by shutting them down by way of a blockade would prove futile.

But the government's handling of the situation will face a vigorous verbal assault from the Tory leader William Hague on Tuesday.

He is expected tell the Tory women's conference that for the first time in a generation the country appears to be in crisis because of the government's handling of the fuel protests.

"This week, Tony Blair's government looks like one of the communities struggling to cope with the rising flood water - awash with problems, increasingly without power, and cut off from the rest of the world," he will say.

Cuts across the board

And fuel tax campaigner David Handley warned: "The only thing that the People's Fuel Lobby is willing to accept is a cut in fuel tax right across the board for every single person in this country. That is what it's got to be.

"We do not want special incentives. This cut has got to be for people in this country and for all the people who supported what we did for six days to make sure we get cuts."

Pensioners a priority

Home Secretary Jack Straw described public support for further fuel protests as "ambiguous".

Mr Straw was speaking after a meeting of the fuel supply task force, whose membership includes representatives from oil companies, unions and the police.

Brynle Williams met minister

"There is no doubt members of the public do not like high fuel prices - I do not know a single person, myself included, who likes paying high fuel prices," Mr Straw said.

"But we have to look at taxation in the round - the public understands there are competing priorities for the same money, not least the claim of the pensioners."

Both Prime Minister Tony Blair and Mr Brown are to hold talks with pensioners' groups on Tuesday in a bid seen by some to shift public perception on to the issue of OAPs' benefits and away from fuel, ahead of the Chancellor's statement.

Following a meeting with Transport Minister Lord Macdonald, fuel campaigner and North Wales farmer Brynle Williams said he was optimistic a "sensible and amicable conclusion" could be reached over fuel tax cuts.

Industrial meltdown

He added he had no idea what action fuel protesters would take if their demands were not met as he was not party to any of their meetings.

Lord Macdonald said: "I've been talking to the hauliers and farmers that came along.

"They have been giving me a range of their experience in the industry in North Wales.

"I'm trying to do what's best for the haulage industry."

Government sources said official figures had shown that during the last fuel protest in September car manufacturers had been within a week of shutdown by the time supplies had started flowing again.

Defence and aerospace industries were within a week of "serious problems" and steel makers had been on the brink of a 40% reduction in output, they added.