Ministers impose new tax on restaurants and shops

A pounds 2-A-WEEK "tax" on every food shop and restaurant in the country will be proposed by the Government next month to pay for the new Food Standards Agency.

A cabinet committee agreed before Christmas to give the go-ahead to the controversial licensing scheme for a flat charge on an estimated 600,000 outlets selling food, to meet around half of the pounds 100m running costs for the agency.

The agency is intended to restore public confidence in the British food industry after a series of crises affecting public health.

Whitehall officials shelved the scheme after an outcry from the food industry when the White Paper was first published last January. The Food and Drink Federation described the flat fee as a "food poll tax".

But Tony Blair ordered ministers to revive the plan - to fulfil a Labour manifesto commitment - when it became clear that a deal with Tory and cross-bench peers over reform of the Lords would provide more parliamentary time for more legislation in this session.

To the dismay of the food industry, the Prime Minister has given the plan the highest priority and ordered ministers to get it on to the statute book by the autumn. Downing Street believes the agency's work is vital to restore public confidence after a series of food scares, including Creutzfeldt Jakob disease from infected beef, and an E.coli food poisoning epidemic in Scotland which left 20 people dead and 400 ill.

"We think pounds 2 a week is reasonable, and it was the only way of raising the money," said a ministerial source. "One problem is that we can't put a charge on imported food so it will have to go on stores and restaurants."

Nick Brown, the Agriculture Minister, appears to have has lost his battle for the Treasury to bear the full running costs of the agency.

Restaurateurs and shopkeepers may pass on the cost to customers by raising prices. Although many owners will be able to afford a pounds 100-a- year charge, they are concerned that the cost could escalate, once the levy is introduced.

Mr Brown confirmed the go-ahead for the scheme in a written answer on the last day of Parliament before the Christmas break.

Ministers argued that the credibility of the agency would be undermined if its independence was compromised and Mr Blair had ordered that it should be under the ministerial responsibility of the Department of Health.

To preserve its independence, ministers will suggest to MPs that it reports jointly to the select committees for health and agriculture, in a rare merging of the committees for special hearings. There were rumours in Westminster that officials at Ministry of Agriculture Fisheries and Food had fought a rearguard action to prevent the agency being fully independent by making it answerable to Maff, but that was denied by ministerial sources.