Page last updated at 14:18 GMT, Thursday, 1 April 2010 15:18 UK

Ministers on defensive as tax row intensifies

Lord Mandelson: "Mr Cameron and Mr Osborne are peddling a deception"

A row over National Insurance rises has escalated after business leaders said claims they had been "deceived" into backing Tory plans were "patronising".

Chancellor Alistair Darling accused the Tories of promoting "illusory" savings after 23 top bosses backed proposals to curb National Insurance increases.

Mr Darling said the bosses should take a "long look" at the Tory plans, rather than accepting "flimsy advice".

But two of them hit back instantly, accusing Labour of a "tax on jobs".

Next boss Simon Wolfson, a longstanding Conservative supporter, said in a statement: "Of course we have not been deceived.

"The principle is a very simple one. It is a question of, do we pay for government profligacy through increased taxes or do we urge them to save money in a way that businesses have?"

'Sweet shop'

Kingfisher chief executive Ian Cheshire said: "It's a little patronising to suggest that we've been deceived.

To say somehow Britain's business leaders have been deceived is patronising, wrong, will backfire, and shows that their plans are in meltdown
David Cameron
Conservative leader

"This isn't a political point, it's a business issue - whichever way you look at it, it's a tax on jobs."

Business Secretary Lord Mandelson said the Conservative plans were a "cynical deception" that could not be achieved without increasing VAT, as he said the Conservatives had done after winning elections in 1979 and 1992.

He said shadow chancellor George Osborne was "like a kid in a sweet shop, who thinks he can just grab sweets from every jar without paying for them".

"Of course there are some in business who are going to support what appears to be a pain-free tax cut. I mean, who wouldn't, if offered that?" said Lord Mandelson.

"But the point is, this is not pain-free and Mr Cameron and Mr Osborne are peddling a deception."

'Panic'

Alistair Darling, appearing alongside the business secretary at an election campaign-style press conference, said company bosses supporting the Conservatives in a letter were backing pledges made on a "wing and a prayer".

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He accused Mr Osborne of "double counting" and claimed the Conservatives had a £22bn "credibility gap" in their economic plans - although he conceded this had gone down from the £34bn gap previously claimed by Labour.

Mr Darling also said the £6bn in efficiency savings the Conservatives planned to use to axe the National Insurance increase were "illusory, non-specific and unbankable".

Mr Darling said Mr Osborne was producing "panic" plans based on "the next day's headlines".

And he urged the business leaders who signed the letter to "have a long look at what the Tories are up to and then they might just have some serious questions to ask".

He said no chancellor could rule out future increases in VAT - but said he had ruled such a move out last year when he was planning how to cut the budget deficit.

'Significant moment'

If they win the election, the Conservatives plan to scrap the planned April 2011 National Insurance rise for anyone earning less than £45,400 a year, which they say would save people £150 a year on average and also reduce the tax burden on firms.

Mr Cameron said the plan would not hamper efforts to cut Britain's record budget deficit - or mean a rise in VAT.

David Cameron: "There is a threat to the recovery from putting up National Insurance"

Speaking on a campaign visit at a B&Q store, he said: "Our plans don't involve an increase in VAT.

"We say it's wasteful spending that's cut, rather than putting up taxes, as the government suggest."

He said the backing of a "pretty incredible" list of business leaders was a "very significant moment" in the election campaign that showed the Tories "have got it right and Labour have got it wrong".

"Labour, today, to say somehow Britain's business leaders have been deceived is patronising, wrong, will backfire, and shows that their plans are in meltdown," he added.

Lord Digby Jones, the former head of the CBI who served as a trade minister under Gordon Brown, said it was "utter rubbish" to claim that company chiefs had been deceived as it was clear that the NI increase would hurt their businesses.

While he believed Lord Mandelson was "wrong" on the issue, he said he regretted the fact that both sides were "politicising" the matter.

"This is about people's jobs at stake as we come out of recession and should not be about who can claim support," he told the World at One.

Among the high-profile businessmen to back Mr Cameron are Marks & Spencer chief executive Sir Stuart Rose, Sainsbury's boss Justin King and Easygroup's Sir Stelios Haji-Ioannou.

Writing to the Telegraph, the business leaders said Labour's proposed 1% NI increase was an "additional tax on jobs" and would "endanger" recovery.

Cable reaction

Lib Dem Treasury spokesman Vince Cable said the NI increase was a "bad tax" that was "damaging" but he added: "I don't think there is anything that any credible opposition party can do to reverse it, given the extreme nature of the financial crisis."

He added: "We are all in favour of efficiency in government but they themselves [the Conservatives] have ridiculed suggestions from the Labour government that you can make large-scale, easy savings in that way."

He said the Lib Dems had identified "specific" spending cuts totalling £15bn, unlike Labour and the Conservatives.

BBC Political Editor Nick Robinson said the Tories regarded the business leaders' letter "as a pre-election coup allowing them to claim that it is Labour and not them who are a 'threat to the recovery'".

But it was "impossible for anyone to know whether the government or the Tories will realise the savings they're aiming for", he said, and in the end voters would have to use their instincts to decide which party shared their values and was being honest.


The full list of signatories to the letter: Sir Anthony Bamford (JCB); Bill Bolsover (Aggregates Industries); Dominic Burke (Jardine Lloyd Thompson); Ian Cheshire (Kingfisher); Neil Clifford (Kurt Geiger); Mick Davis (Xstrata); Aidan Harvey (Tullow Oil); Lord Harris (Carpetright); Justin King (Sainsbury's); Sir Chris Gent (GlaxoSmithKline); Ben Gordon (Mothercare); John Lovering (Mitchells and Butler); Graham Mackay (SAB Miller); Alistair McGeorge (Matalan); Nicolas Moreau (Axa UK); Stephen Murphy (Virgin Group); Alan Parker (Whitbread); Sir Stuart Rose (Marks and Spencer); Paul Walsh (Diageo); Joseph Wan (Harvey Nichols); Simon Wolfson (Next); Zameer Choudrey (Bestway Cash and Carry); Sir Stelios Haji-Ioannou (easyGroup)



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SEE ALSO
Company bosses back Tories on tax
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Tories make Nat Insurance pledge
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