Philip Webster, Political Editor
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Huge rises in road and petrol taxes for millions of motorists could be scrapped after two Cabinet ministers hinted at another U-turn in government policy.
After warnings from MPs that the party was alienating ordinary voters, Jack Straw and John Hutton suggested that the Pre-Budget report in the autumn would contain changes to plans set out by the Chancellor in March.
But, in a further sign of government confusion, Downing Street and the Treasury insisted that no plans were being considered to revise the vehicle excise duty changes announced in the Budget. Both were swift to rule out suggestions of another mini-budget similar to the £2.7 billion package announced a fortnight ago to ease the impact of the abolition of the 10p tax-rate.
Mr Hutton and Mr Straw appeared to have taken No 10 and the Treasury by surprise, suggesting that changes to plans that have alarmed Labour MPs might come in this autumn’s Pre-Budget Report.
The MPs want Mr Darling to scrap plans, revealed in The Times this month, to make a new £200 charge on high-emission cars applicable to vehicles bought since 2001 because it would amount to retrospective taxation of drivers.
Mr Darling and the Prime Minister were cautious because any change of the sort demanded by Labour MPs would cost up to £2 billion, money the Government does not have at its immediate disposal.
The £2.7 billion tax package last month was paid for directly by borrowing and a senior official said last night: “We can’t do that again. Money does not grow on trees.”
Even so, it is clear that changes will be made as the Government tries to appease backbenchers and address their concerns over the changes that are hitting the middle classes. Mr Darling has agreed to meet Labour MPs next week.
As hauliers protested in London and Wales, expectations were growing that Mr Darling will not go ahead with the 2p per litre rise in fuel duty due in October.
In France, President Sarkozy responded to blockades by fishermen protesting at fuel prices by calling on the European Union to suspend part of the VAT levied on fuel in response to rising oil prices. His proposal was swiftly slapped down by the European Commission and was met with little enthusiam in No 10.
The interventions by Mr Hutton and Mr Straw stoked expectations of a U-turn for which the Treasury and No 10 did not seem to be ready. An official said: “It would be wrong to suggest anything is being considered or that anything is imminent.”
Asked in a BBC interview about the retrospective element of the changes to excise duty, Mr Hutton, the Business Secretary, said: “I think we should wait and see on that. The Chancellor is listening to what people are saying about vehicle excise duty, as he has done on a number of occasions about tax rises.” Mr Straw, the Justice Secretary, went further, suggesting that changes were imminent. He said that the vehicle excise duty change would not come into effect until next April, adding that Mr Brown and Mr Darling were “listening to public concerns”.
Officials said last night that the changes on road tax announced in the Budget in March would not appear until next year’s Finance Bill, leaving plenty of time for discussion. “The biggest thing we would have to decide is whether we have the money, and where it would come from,” one said.
MPs are concerned because many of the cars affected by the tax change are popular family models, such as the Renault Espace and Vauxhall Zafira.
Last night’s confusion underlined Mr Brown’s problems with Labour MPs worried about losing their seats. Brian Iddon, MP for Bolton South East, said: “I’m getting complaints from our core Labour vote that they feel the Labour Government is just hitting them left, right and centre. They are heavily bruised at the moment.”
Dr Iddon cited the ban on smoking in public places and rising alcohol and food prices as other causes of anger.
George Osborne, the Shadow Chancellor, claimed that poorer families with older cars would be hit hardest. He added: “Everyone knows that Alistair Darling and Gordon Brown will be forced into a U-turn on this issue, as they have on so many other tax changes. So why put off today what they will have to do tomorrow?”
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