Brown warns Europe over tax

Gordon Brown today plunged into a bitter new tax battle with Brussels as the Government's relations with the EU fell to a deep low.

The Chancellor, who was heading for a meeting of finance ministers, told the EU Commission to abandon its latest attempt to set Europe-wide taxes for companies.

Instead, he said the Commission should concentrate on cutting the mountain of directives and regulations that were strangling business and jobs.

Mr Brown has been infuriated by attempts to undermine Britain's right to veto tax proposals - and by a threat to use the EU court to compel governments to accept "a common consolidated tax base".

The dispute is only one of a series of rows involving the most senior members of the Government.

Foreign Secretary Jack Straw has personally signalled that Britain may have to veto the proposed EU constitution. And the summit yesterday between Tony Blair and President Jacques Chirac, intended to trumpet Anglo-French solidarity, instead only laid bare the continuing disagreements over Iraq and defence.

Ministers have all along said that Britain would veto the constitution if necessary rather than surrender the Government's right to set policy on defence, foreign policy and tax.

But the message from Mr Straw yesterday was that there is now a real threat, amid serious opposition from other EU members as well as Britain, that the constitution could founder.

One senior minister said that securing a treaty was "highly desirable but not absolutely necessary".

Mr Blair will meet fellow EU leaders for a key summit in Brussels next month, at which France, Germany and others hope the constitution, setting the arrangements for an EU enlarged from 15 members to 25, can be agreed. There were already suggestions a deal could be delayed until next year.

But ministers yesterday were signalling that the effort could collapse, not least because of a defeat in one of the national referendums that several member nations - though not Britain - are pledged to hold.

Mr Brown, at today's gathering of finance ministers in Brussels, has the backing of France, Ireland and the Netherlands in his stand against the EU Commission.

Mr Blair has lined up alongside Spain, Poland and a number of the other new EU members to demand more voting power under the new constitution to block domination by the big two, France and Germany.

Senior EU figures today suggested that the latest warnings from Britain amounted to no more than a negotiating tactic. They said they still believed the constitution would go through, even if it only happened after a traditional eleventhhour display of brinkmanship.

Mr Blair, however, went straight from his strained summit with the French president yesterday to a meeting with Spain's premier José aria Aznar, one of the Prime Minister's closest EU allies. That was seen by some as another signal of a move to resist any steamroller attempt from Paris and Berlin.

Germany and Italy have led the governments warning that the text of the constitution hammered out in 17 months of delicate negotiation should not be tampered with for fear the whole deal could unravel.