Brown secures green light on VAT reduction

EU rewards 'positive attitude' of new ministers

The Government's drive to sweeten relations with the European Union intensified yesterday as Gordon Brown, the Chancellor, promised a "constructive and positive" attitude towards the EU's economic agenda.

Jack Cunningham, the Agriculture minister, spoke of a "new approach" to the beef ban and an end to the "aggressions and intransigence" of the past. He also promised a constructive approach to the fish quota-hopping controversy.

The two ministers, both on their first visits to Brussels since the election, won swift praise from European partners for their overtures, which secured some positive results.

Mr Brown yesterday secured a deal under which the European Commission signalled it would not attempt to block the Government from reducing VAT on domestic fuel. Brussels officials had earlier warned that the VAT reduction ran counter to the spirit of an EU directive on tax harmonisation.

Mr Cunningham, meanwhile, was told that the commission would work "as fast it it could", within the constraints of scientific advice, to secure a gradual easing of the beef ban.

Despite the new harmony, however, the British ministers were made aware that smooth-talking will soon have to give way to tough decision-making.

After yesterday's finance ministers' council, Mr Brown was forced to side-step questions on when the Government would decide on whether to join the single currency.

Under the Maastricht treaty, Britain must notify its partners of whether it wants to join at the start, on 1 January 1999, by the end of this year.

Yesterday the Chancellor refused to be drawn on how such a notification might be formulated, and maintained his election-campaign position, that the Government is keeping its options open on whether to seek backing for membership in a referendum.

Furthermore, despite market rumours to the contrary, Mr Brown maintained he had "no plans" to take Britain back into the exchange rate mechanism, a move other member states would see as an indication of readiness to sign up to the euro.

Nevertheless, it was evident yesterday that pressure on Britain to take a view on the euro is already increasing as the deadline for the launch approaches.

The finance ministers cleared the way for Portugal and Spain to join in the first wave, by agreeing the countries' economic convergence programmes.

Yves Thibault de Silguy, the Economic Commissioner, welcomed Mr Brown's decision to move towards the creation of an independent Bank of England as a "step in the right direction" towards meeting a key Maastricht criterion.

For Mr Cunningham, yesterday's discussion brought to the fore the enormous hurdles which have yet to be surmounted if Britain is to secure a lifting of the beef ban.

Mr Cunningham said he would present a "new agenda" on how to make progress but conceded that it would be foolhardy to suggest any new deadlines for easing the ban.