Redwood steps into row over Greenbury

JOHN Redwood is to take on the Chancellor, Kenneth Clarke, by opposing his controversial plan to tax share options as income and appealing for public spending cuts.

The move by the unsuccessful Tory leadership challenger comes in the wake of Mr Clarke's invitation to Sir Richard Greenbury, chairman of the committee that recommended the change, to come to the Treasury this week. The meeting raises the prospect of moves to defuse the row.

Sir Richard admitted last week that the proposals had not been thought through. The changes will hit those on lower incomes, including supermarket workers, harder than corporate "fat cats".

One of Mr Redwood's closest allies said the former Cabinet minister thinks "it is wrong to tax share-option schemes for typists and middle managers". He believes the share-option fiasco is a good example of the government evading its responsibilities by appointing a grand figure to go away and produce an answer.

Members of the Greenbury committee had been planning to meet again on Tuesday to reconsider the issue. In a letter sent yesterday, the Chancellor accepted Sir Richard's apologies for the "confusion which now surrounds your report after all the hard work which you and your colleagues had put into it".

He added: "May I suggest that your committee might do better if you came into the Treasury to explain what your views now are to my tax experts who will be responsible for preparing the next Finance Bill."

One Treasury official said that the meeting, with Michael Jack, the Financial Secretary, would be unlikely to result in a change of heart by the Chancellor. The Treasury believes there are better ways of increasing workers' stakes in their companies, such as savings- and profit-related schemes, than free share options. But the Chancellor is coming under mounting pressure from senior colleagues to resolve the row before the party conference.

Leading Conservatives are convinced that Mr Clarke wants to find a way out of the impasse. "This needs to be resolved quickly," said David Shaw, the Dover MP coordinating parliamentary resistance to Mr Clarke's clampdown. "No minister should go on holiday until this is dealt with. Many thousands of people do not want uncertainty over this going on to the Budget".

Mr Redwood further increased the pressure on the Chancellor by repeating earlier demands for a pounds 5bn cut in public spending. His comments came as the Chancellor and his closest advisers met to set the framework for November's Budget.

Mr Redwood, who made a pounds 5bn cut the centrepiece of his manifesto when he challenged Mr Major, told BBC Radio Wales: "The Government this autumn should be pencilling in around pounds 5bn of tighter control over public spending from clear areas where we can save, and give that back to people in the form of tax cuts."

Mr Clarke's officials attempted to play down expectations of big tax cuts in November, saying the Chancellor will cut taxes only when it is economically possible.

But one leading Conservative backbencher rejected that view. John Townend, chairman of the Conservative back-bench MPs' Finance Committee, said the Government is "in the last-chance saloon" and must bring in tax cuts in the November Budget or risk losing the next general election.

Mr Townend said there was "virtual unanimity" among backbenchers that at least pounds 7bn - equivalent to 4p in the pound in income tax - should be axed from government spending so that voters could feel the benefit next April.

Tory MPs are urging Mr Clarke to cut taxes by abandoning the planned 0.5 per cent real increase in public spending; slashing the overseas aid budget by pounds 500m; pulling the troops out of Bosnia; and taking a "very careful look" at social security spending, particularly on single mothers and immigrants. They are also demanding an attack on waste in local government.