Hague warns of tax threat

Hague: Economic control would go to Brussels

William Hague used his news conference on Wednesday to accuse Labour of planning to transfer control of the UK economy to Brussels.

The Tories say a leaked European Commission document shows there are plans to harmonise income tax and VAT across the EU - leading to possible rises in the UK.

The single currency is meant to be for life not just for Christmas

William Hague

They say the "explosive" plans come from a group chaired by a Labour minister.

The attack - flatly rejected by Labour - comes as Tory unity on European policy is put under scrutiny.

Mr Hague insisted the party was united - and said Lady Thatcher had been unusually restrained in her opposition to the single currency at a Tory rally on Tuesday.

'United front'

"I have no difficulty whatsoever in saying that the Conservative Party is united - the choice at this election is between a Conservative Party that will keep the pound and a Labour Party that will abolish the pound."

In Plymouth on Tuesday evening, Lady Thatcher said she would never support entry into the single European currency.

Some Tory election candidates too have gone further than the official policy of ruling out entry only for the lifetime of the next parliament.

Asked about Lady Thatcher, Mr Hague replied: "As far as her comments on the single currency are concerned, I thought she was rather restrained compared to what she often says."

tax attack

The Tories are using the European harmonisation issue as part of a two-pronged tax attack.

They claim tax harmonisation would mean higher taxes for the UK.

And they continue to press Chancellor Gordon Brown to rule out completely removing the ceiling for National Insurance (NI) contributions.

Mr Brown has dismissed claims that he is planning to use (NI) to introduce a 50% top tax rate by stealth.

Portillo: Pressed for VAT guarantee

Labour says it too opposes moves towards European tax harmonisation.

Mr Brown told reporters: "It is a complete lie and a Tory tax smear to suggest Labour has any proposal in that direction."

The EC leaked document itself says it must ensure that tax policy "contributes to reductions in the overall tax burden".

But the Tory leader said the EU's actions invariably led to an increase in taxes, even if it paid lip service to cutting them. And he claimed the only concession Tony Blair had ever won in Brussels was for "harmonisation" to be called "co-ordination" in EC documents.

Mr Hague told the party's election news conference: "The EU intends to take away Britain's power to decide its own tax rates.

"The document talks of the necessity of co-ordinating national income tax systems."

He claimed too that Labour would hand control of interest rates to Brussels in what would be a "grave error".

Pressed on tax

Shadow chancellor Michael Portillo said he had only seen the first 17 pages of the "very secret" tax harmonisation document.

"There are references to darker secrets within the remaining portion of the report," he said.

Mr Portillo warned tax harmonisation could see VAT extended to books and children's clothes.

Both he and Mr Hague were pressed repeatedly at the morning news conference to guarantee they would neither raise the level nor extend the scope of VAT.

They refused, arguing that overall they wanted to cut taxes.