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Tuesday, December 1, 1998 Published at 16:51 GMT

UK Politics

Brown faces long tax struggle

Brown faces tax battle

By Political Correspondent Nick Assinder

As Gordon Brown lays down the law to EU finance ministers in Brussels over plans to harmonise taxes, he is painfully aware that the meeting is only the first skirmish in what could turn into a long and bruising battle.

The government is determined not to be seen caving in to its left-wing colleagues in Paris and Bonn and will threaten to use the veto at every turn.

But there are powerful forces lined up against the chancellor - both at home an on the continent.

In the EU, he faces the combined might of France and Germany which are eager to press towards a highly-integrated tax regime across Europe.

[ image: Oskar Lafontaine is causing Gordon Brown considerable headaches]
Oskar Lafontaine is causing Gordon Brown considerable headaches
They argue that, with a common currency, there is a need for, and an inevitability about, closer tax harmonisation.

Blind panic

They point out that EMU is not just about monetary union, but also economic union.

That sends Euro-sceptics in the UK into a blind panic and, with the help of powerful allies in elements of the national press, they start predicting the end of civilisation as we know it.

And, of course, Britain will not join the single currency with the others next year, meaning ministers' influence on how the project develops will be severely limited.

So-called "scare stories" about the end of zero rating of VAT on children's clothes and food will flourish - with plenty of encouragement from hard-line elements in the EU and the press.

Things aren't helped by the language used by senior EU politicians such as German Finance Minister Oskar Lafontaine and his French ally Dominique Strauss-Kahn who lose no opportunity to express their commitment to harmonisation.

Conservative allies

So Mr Brown has to walk a delicate tightrope between being seen to protect Britain's national interest while not "doing a Maggie" and constantly saying, "no, no, no".

[ image: The UK chancellor won't repeat Margaret Thatcher's famous
The UK chancellor won't repeat Margaret Thatcher's famous "no, no, no"
At the same time there are key elements of the tax proposals that he actually supports and will happily go along with.

The row has seen Britain lining up with a Conservative government in Spain - not exactly what Mr Blair usually means when he talks about a third way.

And there is the real danger that the New Labour government will find itself isolated in the same way the last Tory administrations did.

But Mr Blair and the chancellor believe they have to damp down the worst fears or public opinion will be swayed so far against the single currency that it might become impossible to join at a later date.

Meanwhile, with Britain excluded from the key committee overseeing the running of the single currency, there will be plenty of scope for those inside EMU to forge ahead with their own agenda despite the UK's protests.

There is much more to come.

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