Labour 'backs down' on cider and broadband taxes

Labour was forced to sacrifice three controversial tax measures as it rushed through other key legislation before the dissolution of parliament, the Conservatives claimed.

The 10% tax increase on cider, a new tax on phone lines to pay for super-fast broadband and the scrapping of tax relief on holiday homes were all lost in the "wash-up", the Tories said.

They were featured in the Finance Bill - effectively implementing last month's Budget programme - which is to be considered by the Commons today.

Labour insisted, however, that none of their policies had changed and that the Tories were being "fiscally irresponsible" in their demands.

Other Government measures that were abandoned yesterday, with just two days to get through as much business as possible, included the promised referendum on reform of the voting system and reducing fees for libel lawyers.

All are sure to be reinstated if Labour is re-elected in the May 6 General Election, but have been sacrificed this week because they are too controversial to be fast-tracked through Parliament before it is prorogued on Thursday.

The 10% increase on cider duty - on top of inflation - came in on March 29, but it will now be reversed on June 30 unless Labour wins the election.

Landlines were to be taxed at 50p per month plus VAT and furnished holiday lettings were to have their tax position changed to raise an extra £20 million a from 2011/12.

Shadow chief secretary to the Treasury Philip Hammond claimed a "major victory" for businesses and consumers.

"The Conservatives have forced the Government to back down on three significant tax hikes - on fixed phone lines, cider and holiday lettings - that would have hit consumers and businesses in the pocket and damaged the recovery," he said.

"But the threat couldn't be clearer - if Labour is re-elected all three taxes will come back. Only a Conservative Government will stop Labour's tax increases.

"This shows why we need change - why it's time for an end to Labour's debt, waste and taxes - time for a new Conservative Government with the energy, ideas and vision to get the country moving again.

"The choice at the election could not be clearer - five more years of Gordon Brown's tired government making things worse, or real change with the Conservatives."

West Country pop group The Wurzels, whose hits included "I Am A Cider Drinker" and who have led criticism of the cider duty rise, said they were "delighted".

"Here in the West Country cider is close to our hearts and if we, through our music and association with cider, helped bring this campaign to a ciderhead, then I think we all deserve a pint," they said in a statement.

However, Financial Secretary to the Treasury Stephen Timms said: "The Tories are quite wrong to suggest they have killed off tax on cider or anything else in their negotiations with the Government.

"No policy will change as a result of the negotiations. The Government did agree there would need to be further legislation to carry on the tax relief beyond June 30, and the broadband levy and abolition of tax relief on holiday homes would be included in (a) second finance bill.

"If the holiday home measure doesn't go ahead the UK Government will have to pay tax relief to everyone with a holiday home within the EU.

"The Tories are being fiscally irresponsible, playing populist cards rather than reducing the deficit or protecting frontline services."

Jeremy Browne, Liberal Democrat shadow chief secretary to the Treasury, said: "It was concerted Liberal Democrat pressure that forced the Government to reverse its policies on cider tax and holiday lettings.

"We repeatedly opposed these proposals in Parliament, and Labour have clearly bowed to this and to the weighed of public opinion.

"The Government's hike in cider tax raised very small amounts of money and put vital local industries at serious risk.

"Labour also claimed the removal of a tax exemption for holiday lettings was a necessity under EU law, but that is clearly not the case.

"These were clear examples of the Government trying to rush through tax changes when they had failed to consider either the revenue it would raise or the impact on industry."

The Government is trying to get as much legislation as possible on to the statute books before the dissolution.

But how much of the legislative programme becomes law is down to negotiation between the Government and opposition parties.

Other casualties of the "wash-up" include moves to hold a referendum on using the "alternative vote" system for future Westminster Parliamentary elections.

Ministers said they were also abandoning plans to phase out hereditary peers in the House of Lords by ending the system of by-elections when one of the existing hereditaries dies.

Justice Secretary Jack Straw accused the Tories of holding up reform by insisting that the clauses on the AV system and hereditaries should be removed from the Constitutional Reform and Governance Bill.

In a letter to his Tory counterpart Dominic Grieve, Mr Straw said: "The Conservative party talks about change. But behind closed doors they are blocking key legislation to reform our voting system and abolish hereditary peers."

Legislation to drive down fees charged by libel lawyers has also been dropped.

That would have reduced the fees charged by "no-win no-fee" lawyers in defamation cases from 100% to 10%.

Commons Leader Harriet Harman also announced yesterday that controversial plans to cut off internet access to illegal file-sharers would not be rushed through.

She said there would be a public consultation on the draft regulations that would give powers to the courts to block access to websites for persistent internet pirates.

However, Ms Harman's flagship Equality Bill was sent for Royal Assent last night.

MPs approved without a vote peers' amendments which included protection against discrimination for pregnant schoolgirls and young mothers.

The House of Lords also agreed to remove the ban on civil partnerships taking place in religious premises, and added provisions that can be used to require political parties to publish anonymous information on the diversity of their candidates.