Election '97: Cowley Street silent on energy tax plans

The Liberal Democrat high command has scrapped plans to publish details of the party's proposed energy tax because of fears that Labour and the Tories would use it against them.

This anti-pollution tax would put the cost of domestic energy and gas up by 3 per cent in its first year, with further rises to come. But the money raised would be used to cut VAT across the board by half a per cent, with further tax reductions to follow.

The party's environment team is dismayed by the leadership's decision not to cover the proposed tax change at the regular morning press conferences. A senior party source said: "Obviously, there is nervousness about saying anything more about tax than we need to, for fear of how our opponents might use it."

The proposal forms a key component of the party's environmental policies which have made it distinctly greener than the other main parties.

The energy or "carbon" tax gets a brief mention in the manifesto, but there are no figures. The central option is to tax coal, oil and gas at a rate of pounds 10 per tonne of carbon dioxide produced when burnt. That would rise by pounds 7.50 in each of the next two years.

Household gas and electricity bills would go up by 3 per cent in the first year, and slightly less in the two following years.

In year one, all the pounds 1.1bn raised would be used to cut VAT from 17.5 to 17 per cent. In year two, some or all of the extra revenue would be used to cut employers' NI contributions, encouraging job creation.

Using government figures, the Liberal Democrats estimate a pounds 10 per tonne of carbon tax would reduce emissions of greenhouse gases by half of 1 per cent.