Brown confronts Brussels over 'illegal' spending

Special report: European integration

Staff and agencies
guardian.co.uk, Tuesday 5 June 2001 10.28 BST

The chancellor, Gordon Brown, today took time off from campaigning to confront the European commission over its attempts to dictate British tax and spending policy, after commissioners said Labour's public spending targets would put the country outside European Union budgetary limits.

Mr Brown attended the monthly meeting of EU economic and finance ministers in Luxembourg in the hope of hearing a turn-around from commissioners over who controls the UK treasury - the government or the EC.

On Friday, Labour sources claimed that Mr Brown had triumphed over EC demands to limit its spending plans, with the EC forced to back down in the face of the chancellor's intransigence on the subject.

Mr Brown has put plans to boost spending on public services at the heart of Labour's election campaign, but the commission had warned that his investment programme breaches EU economic policy guidelines and must be curbed.

The chancellor has already said he will press ahead with billions of pounds in extra spending on schools, hospitals and public transport in Britain in defiance of the commission's recommendation. He does not agree that EU budgetary stability requires the UK to keep public spending to within 37.3% of national wealth in the 2002-2003 financial year.

Mr Brown was angered by the commission's warning that if he continues with his own domestic economic strategy - increasing spending by more than the rate of growth in the British economy - the country will soon be running an "illegal" budget deficit.

Unless Mr Brown can have the charge dropped today, the commission's concerns will be voted on by EU leaders at a summit in Gothenburg, Sweden, in less than a fortnight.

Labour has been determined to play down the European Union as an election issue, and this last-minute clash of wills with Brussels may provide fuel for the Eurosceptic Tory campaign.

The treasury sees the commission's efforts - effectively to set the UK's economic targets - as a new level of intervention in an EU country's internal affairs. The talks will also focus on harmonisation of some taxes, and particularly the commission's determination to narrow the gap between national rates of VAT on fuel.

On the eve of the talks one commission official said: "It would actually be in the UK's interests, because if we move closer together on energy tax rates, it will reduce Britain's competitive disadvantage and also reduce the incentive for fuel smuggling, something which is a huge problem particularly in Northern Ireland, where cheaper petrol is smuggled in from the Republic."

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