EU tries to end zero-tax on child clothing

The European Commission has called for VAT to be imposed on children's clothes and shoes in Britain.These are, along with books and newspapers, among the goods at the moment exempt from this type of taxes. The scheme unveiled yesterday is part of the continuing attempt by Brussels to force through tax harmonisation - standardising tax rates across the EU. At the moment, Britain, Ireland and Luxemburg are the only countries that do not levy VAT on these articles.

John Healey, the Economic Secretary to the Treasury, said: "This is a ridiculous proposal from the Commission. There is no way we will put VAT on children's clothes. This was a manifesto commitment. If it needs a veto then so be it. End of story." Frits Bolkestein, the EC's taxation commissioner, said in Brussels that he was aware of sensitivities in the UK over the proposals, and of Tony Blair's manifesto pledge. However, he thinks that it is the commission's duty to present consistent economic proposals, even if it is likely that one or other government will block agreement under the unanimity rules, which still apply to tax matters.

Mr Bolkestein added: "It is our job to try to simplify the rules on reduced rates to improve the functioning of the single market and avoid potential distortions of competition." He said it was not certain that the price of children's clothes and shoes would rise if VAT was imposed - because such goods already cost more in the UK without VAT than they do in some European countries applying a 17.5% rate.