Labour MPs urge Brown to cut VAT in Pre-Budget Report

Labour MPs are urging Gordon Brown to cut the 17.5 per cent rate of VAT when Chancellor Alistair Darling delivers his Pre-Budget Report next Monday.

The move would be hugely popular with voters, but MPs accept Brown is more likely to target families through tax credits. "Gordon has told us privately he wants to tackle child poverty because we are missing our targets," said one Labour MP.

A more concrete indication of what to expect in the Pre-Budget Report came today at Prime Minister's Question Time when Brown promised to crackdown on banks and help families and small businesses.

Most MPs report that small businesses are being forced to close by the banks calling in their overdrafts or increasing the interest on their loans. Downing Street is angry that banks are stifling recovery. New measures will be introduced to force banks to pass on the cuts in interest rates and free up lending again.

Geoff Hoon, the Transport Secretary, has also privately told colleagues that Brown has asked him to bring forward capital projects such as rail upgrades and road schemes to take some of the increased spending and create jobs. Labour MPs are also pushing for Housing Minister Margaret Beckett to announce a return to the building of council housing.

Brown has now stoked up expectations so high that he risks disappointment if the tax cuts announced on Monday are less than the £30bn that is expected.

David Cameron warned the PM the Tories will oppose a "spending splurge" but in contrast to the upbeat mood among Labour MPs, Tory MPs looked uncomfortable, particularly following Dave's U-turn on spending.

He bombed in the chamber but grass roots Tories are pleased to see him back on traditional Tory ground - opposing spending and warning of Labour's "tax bombshell". All are agreed that Brown is clearing the decks for a General Election next May.

THE MOLE: QUESTION TIME

FIRST POSTED NOVEMBER 19, 2008