Tax plan fans Europe row

European Commission president Romano Prodi's call for an EU-wide tax to pay its £60bn-a-year running costs has fanned the flames in the election debate over Europe.

The suggestion prompted Prime Minister Tony Blair, in some of his strongest pro-Europe comments yet, to mount a passionate defence of Britain's role in Europe.

Prodi's tax comments prompted Hague anger

But Conservative leader William Hague seized on the "absolutely unacceptable" proposal and accused Mr Blair of covering up the threat of new taxes posed by greater European integration.

As Liberal Democrat leader Charles Kennedy said a Labour election victory was now "looking likely" the campaign also took on a more personal tone.

Major joins fray

Labour launched a new poster accusing Mr Hague of being more Thatcherite than former prime minister Lady Thatcher.

And her successor, John Major, joining the fray at a Tory rally on Tuesday evening, accused Labour under Tony Blair of "bare-faced deception".

Mr Blair's fighting talk on Europe came shortly before Mr Prodi delivered his speech calling for a new dedicated euro-tax to replace the complex system whereby each country hands over a share of national VAT receipts and a proportion of other government funds to the EU kitty.

William Hague lampooned as a Lady Thatcher clone by Labour

Mr Blair also urged the Commission to be given a reinforced role in overseeing the running of the euro and EU foreign policy.

A day earlier Mr Blair's efforts to counter Tory attacks on Europe were not helped by a keynote speech from French Prime Minister Lionel Jospin, in which he called for the harmonisation of business taxes.

But the prime minister, speaking to party activists during a trip to Hammersmith in London, tried to appear unperturbed.

'Self-confidence required'

"Of course there will be people in Europe that take different points of view and we've had speeches today that may take a different point of view but that is not what's important.

"What's important is that we are in there, in Europe, making sure that we're fighting for British interests because our jobs depend on it, 60% of our trade depends on it.

"We've got to have the self-confidence and self-belief to go out and put our case and make sure it's the British case that wins in Europe."

The Labour Party have carried spin far beyond gloss and towards bare-faced deception

John Major

William Hague, addressing a Keep the Pound rally in the Tories' second most winnable seat, Kingston and Surbiton, said Mr Prodi's idea was "another of these proposals that are absolutely unacceptable".

"After all the tax harmonisation plans, to now bring in a special tax across the whole of the EU to pay for the EU, I think, should be rejected immediately.

"Under a Conservative government it will be rejected immediately."

New opposition

Earlier, the Tory leader attempted to keep pushing his claim that a Labour government would rig any referendum on whether Britain should join the euro.

Apparently drawing back slightly from weekend comments, Mr Hague said that a Labour election victory would not mean that the battle to save the pound was lost.

The Tories would fight "tooth and nail" for a "No" vote but it would be a "very difficult" task, he said.

There will be no coherent opposition to a second term Tony Blair government

Charles Kennedy

Meanwhile, Liberal Democrat leader Charles Kennedy predicted that his party could replace the Conservatives as the "most serious" opposition to Labour after the election.

Mr Kennedy, speaking during a BBC News Online webcast, said Labour was "looking the likely winner" in the election - and might romp home with a landslide.

He said the Tories would be in no position to oppose Labour after the election - and so the Lib Dems could fill the role, even if they did not win more seats than the Tories.

Lady Thatcher defiant

Predicting that the knives would be out for William Hague, he said: "The sound of cameras being set up and scaffolding being erected is almost audible around London SW1 at the moment."

But Lady Thatcher refused to accept that the Tories were facing defeat, saying during a walkabout in Northampton: "All is not lost - all is never lost."