Page last updated at 14:49 GMT, Friday, 6 February 2009

Sarkozy attacks Brown's VAT cut

Sarkozy criticises the UK's VAT rate cut

French President Nicolas Sarkozy has criticised Prime Minister Gordon Brown's economic stimulus plan.

In a debate on French TV, Mr Sarkozy, whose handling of France's economy has prompted protests, said the UK's VAT cut had "absolutely not worked".

"Britain is cutting taxes. That will bring them nothing. Consumption continues to decrease," he said.

Downing Street said the French had been in touch to stress the comments were not meant as a critique of UK policy.

But the Conservatives said President Sarkozy was just the latest foreign leader to criticise Gordon Brown's policies.

'Not a critique'

Shadow chancellor George Osborne said: "We said at the time that Brown's flagship VAT cut would only make things worse and would be an expensive failure. That view is now echoed not just by British retailers, but by foreign governments, including France, Germany and Holland," he said.

"Gordon Brown claims to have saved the world. It would appear that world leaders increasingly disagree."

In a 90 minute interview, President Sarkozy defended his plans to revive the French economy, a week after protests and strikes by a million French workers.

I don't believe that the VAT cut hasn't worked
Pat McFadden
Business minister

He made his comments after being asked why France was investing in infrastructure projects not cutting taxes.

Asked about the remarks on Friday, the prime minister's spokesman said: "The Elysee [Palace] have been in contact this morning to assure us that these remarks were not meant as a critique of UK economic policy - which is nice."

He said that the government had set out its case for a VAT cut and other countries had to decide what was appropriate for their economies.

A Downing Street spokesman later added: "It is important to remember the context in which he was making the comments, which as I understand it, was a domestic debate on television about the way forward for the French economy and French proposals for an economic stimulus."


BBC political correspondent Carole Walker said there appeared to be some irritation at Downing Street about the comments. She added it was clear, in the run-up to the G20 summit, that President Sarkozy had a different view to how a fiscal boost should work, than Mr Brown.

Mr Brown's economic stimulus plans came under fire in December from Germany's finance minister Peer Steinbruck, who said Britain's response to the crisis had been "crass" and "breathtaking".

The Conservatives say the criticisms undermine the government's claims that other countries were following the UK's lead over the economy.

The Conservatives and Liberal Democrats have both criticised the year-long reduction in VAT from 17.5% to 15% - estimated to cost 12bn. The Tories say it has been an expensive failure, pointing to figures suggesting shopper numbers had fallen. The Lib Dems said it was a "seriously defective" way of getting money into the economy.

But Downing Street defended the VAT cut, saying recent reports suggested it had stopped sales falling as far as they would otherwise and could be expected to increase sales by 1.2% over 2009.

Business and Enterprise Minister Pat McFadden told BBC Radio 4's The World at One: "I don't believe that the VAT cut hasn't worked. This is something that is going to be in place for the rest of the year.

"I don't deny for a moment that times are tough in the economy but I think that governments do have to be active. Many governments around the world are taking a fiscal stimulus."

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