Hague claims that tax change will cost businesses billions

Tony Blair came under pressure over claims that the Budget could cost business billions of pounds, making Britain "one of the least attractive places for large international groups".

William Hague, the Tory leader, seized on a letter by accountancy group Pricewaterhouse Coopers warning that new rules on double taxation relief could harm Britain's economy.

"One of the biggest taxes on business levied yesterday, the Chancellor characteristically never even mentioned in his speech - the change to double taxation relief," Mr Hague said.

"Pricewaterhouse Coopers this afternoon have voiced their extreme concern over this and said they fear the yield could run into several billions of pounds and they fear this will make the UK one of the least attractive places for large international groups. Are you completely confident about the figures the Chancellor has given to the House?"

Replying, the Prime Minister said he was aware of the firm's concerns. "We believe them to be mistaken. We have asked them to discuss them with us. I believe their assessment is based on a misunderstanding of the tax position."

Mr Hague suggested there was no contest between the Chancellor's accuracy and that of "the most reputable and biggest accountancy firm in the world".

He went on: "If you won't acknowledge that business taxes are going up, what's now the up-to-date figure for the total increase in taxes as a result of last year's Budget and this one?"

Mr Blair said two years had been spent on clearing the deficit inherited from the Conservatives. "But now I'm delighted to say the tax burden is falling."

He said Pricewaterhouse Coopers had written on behalf of certain clients. "It is important for us to investigate whether that is true or not. But I think you are being absolutely fatuous in suggesting that applies to the entirety of business in the UK." Mr Hague asked again what the total net increase in taxes was for the coming month.

"The answer is, even on the Government's figures, a £365m tax increase coming into force next month," he said.

"On the House of Commons library figures, which strip out all the fiddles, it is a £1.4bn increase.

"Will you now say how many people will lose the married couple's allowance next month without receiving any compensating children's tax credit?"

Mr Blair told him: "There is child benefit that has gone up and there is the basic rate income tax cut. The tax burden this year is falling - for 1999-2000 it is 37 per cent [of GDP], next year it falls to 36.9 per cent."

He added: "With the action we took clearing the deficit in the first two years, any rise is less than the rise in the last two years of the Tory government when you were in the Cabinet."

Mr Blair insisted: "If we take the 10p starting rate [for income tax], the basic-rate tax cut, the increases in child benefit, the working families tax credit - Britain's working families are better off."

But Mr Hague said: "The truth is that business taxes are up £30bn and you won't admit it.

"That total taxes next month rise by £1.5bn and you won't admit it. That 10 million people lose a key allowance next month and you will not give the numbers in the Commons.

"The tax burden continues to rise even while the Chancellor denies it. Taxes are up by 8p in the pound of businesses, pensioners, drivers, savers, home owners and millions of families.

"The Government that promised no tax increases at all has cynically and totally broken its promises."