Parliament and Politics: Tory MPs show concern over tax rise threat

FIVE TORY MPs gave an indication of anxiety over possible tax increases last night during a BBC Panorama debate on the economy and the prospects for ratification of the Maastricht treaty.

During a discussion with Lord Tebbit, an opponent of the treaty, and Lord Howe, a supporter, the MPs presented their views on the exchange rate mechanism and Britain's future in Europe.

The backbenchers were split three to two over Maastricht - but they all expressed fears over the possibility put forward by both former ministers that tax increases might be needed to control inflation and offset the public sector borrowing requirement.

Lord Tebbit said there was a strong case for lowering interest rates, but highlighted concern among Tories by adding that he had been 'puzzled' by the Government's handling of the crisis.

It left the ERM and devalued the pound after saying it would do neither of those things, he said, even though it had earlier insisted that such a move would be 'reckless, perverse and bizarre'.

'It would seem that we need a tight control over public spending, perhaps actual reductions of planned public expenditure, and if it had to be, in order to convince the markets that we meant what we said about controlling inflation (and) the public sector borrowing requirement, then tax increases could come.'

Lord Howe, a former Chancellor, said it was a 'tragedy' Britain had withdrawn from the ERM. He said it was vital to restore confidence at home and abroad. 'They (the Government) have to take tough action in relation to public borrowing and, conceivably, interest rates as well.'

The backbenchers, Christopher Gill, MP for Ludlow, John Butterfill, MP for Bournemouth West, Barry Legg, MP for Milton Keynes South West, Michael Ancram, MP for Devizes, and Den Dover, MP for Chorley, urged the Government to cut interest rates and avoid tax increases.

Mr Dover said the economy needed a freeze on public sector pay and a block on recruitment. Mr Ancram said: 'The way to avoid increasing taxes is by reducing public expenditure.' All warned that interest rate or tax rises would cripple businesses.

The secretary-general of the Council of Europe in 1964-69 has taken out a half-page advertisement in the Times calling for a referendum on the Maastricht treaty. In an open letter, Sir Peter Smithers, a former Tory MP, calls the treaty 'a formula for failure and perhaps for conflict'.

The former minister Edwina Currie was booed and heckled by Tory conference delegates last night when she attacked the Government for pulling out of the ERM at a meeting in Brighton. The outspoken former health minister was also barracked when she urged ministers to avoid slashing public spending.