Inside Parliament: Portillo protests too much in attack on Ashdown 'humbug'

A frank admission by Michael Portillo, Chief Secretary to the Treasury, betrayed the object of the Government's current concern yesterday, when in moving the Second Reading of the Finance (No 2) Bill, implementing the Budget, he said that he wished 'particularly' to deal with the Liberal Democrats.

With just 20 MPs, the Liberal Democrats are not normally accorded such attention. Exceptions are made, however, when they threaten to upset the Tories in a by- election, as is the case at Newbury.

Mr Portillo attacked the 'Newbury Declaration' in which Paddy Ashdown, the Liberal Democrat leader, solemly intoned that politicians 'ought to be telling the people the truth', as not only pompous but 'sanctimonious humbug'.

Mr Ashdown declared politicians should look at long-term gain, not short-term calculations. But Mr Portillo said the Liberal Democrats were wedded to the latter and did not give a damn about the former. 'So far from believing that politics ought to be about telling people the truth, for a few extra by-election votes, the Liberal Democrats would sell their grannies.'

Mr Portillo said that at Newbury, the Liberal Democrats had pledged to scrap the extension of VAT and tried to make it the centrepiece. of their campaign. Yet their Green Paper entitled 'Costing the Earth', issued in 1991, advocated a tax on energy as a first priority and an end to 'the anomalous zero rate on VAT on fuel'.

Alan Beith, the party's Treasury spokesman, leapt up to point out that it was a Green Paper, meaning for consultation, and had not become party policy. 'We took up the suggestion that he is resisting; that energy taxes should be related to the pollution and resource depletion effect, like the European carbon tax. That is the way to proceed; not to foist tax in the same way on wind power as it is foisted on nuclear power.'

Labour MPs lapped it up. The Budget imposed 8 per cent VAT on domestic gas and electricity from April 1994, rising to the standard 17.5 per cent rate from April 1995. But Harriet Harman, the shadow Chief Secretary, pointed out that Mr Portillo said in his election address that the Tories wanted to cut taxes.

She charged that they had not only broken election pledges over VAT but were now set to use the burgeoning public sector borrowing requirement as an excuse for dismantling the welfare state.

'None of the Tory MPs here warned their constituents that to vote Tory would mean chopping benefits and services. Chopping the welfare state is not just an expedient caused by economic incompetence by the Government. It is also the hidden agenda of the Tory right wing. They see the increase in borrowing as a chance to take the axe to services which they have never believed in, and benefits which they have never had to rely on.'

Mr Portillo reminded MPs that spending on social security, health, education and the Home Office was being reviewed. 'What is loose change in these programmes can be more than the entire budget for another department. Social security is the prime example. It accounts for pounds 80bn a year, one-third of all public spending. Every working person contributes pounds 10 daily to cover its costs,' he said.

Mr Portillo, as a former member of the Thatcherite No Turning Back group, is precisely one of those Ms Harman had in mind when she talked of 'the Tory right wing'. Another is Peter Lilley, Secretary of State for Social Security.

Earlier, at Question Time, Mr Lilley refused to rule out the prospect of cuts in invalidity benefit and sickness pay next April as part of the review of his budget.

Mr Lilley and his ministerial team had returned from a two-day 'headbanging' seminar for reviewing cuts in benefits for some of the poorest in society at Chevening, the Foreign Secretary's grace-and-favour mansion in Kent. In addition to his officials, the meeting was attended by Madsen Pirie, director of the Adam Smith Institute, a right-wing think tank, the author of proposals for allowing people to opt out of the state pension and into private insurance schemes, which Mr Lilley signalled he supported for the long term.

Tories on the left of the party, including Ian Taylor, MP for Esher, supported the case for encouraging more people - possibly through tax incentives - to provide for their own old age.

Mr Lilley said he wanted to focus increasingly on the need to ensure that people had greater control of their own resources and tailored provision to their own needs.

Pressed to divulge the outcome of the private discussions, Mr Lilley described weekend press speculation as 'imaginative' but did not deny that under pressure from the Treasury he was preparing to tighten eligibility rules for invalidity benefit, and leaving employers with more of the burden for statutory sick pay.

He assured MPs that election pledges on child benefit and the state pension would be kept. 'The basic pension is the keystone benefit for retired people and we have no intention of deviating from that pledge.'

A hint in the Lords of deviation from an entirely different policy might bring some comfort to up to 12,000 veterans of Second World War convoys to Russia. Responding to pleas from both sides of the House, Viscount St Davids, a junior minister, promised to raise with Malcolm Rifkind, Secretary of State for Defence, the possibility of amending regulations to permit the wearing of the Russian Commemorative Medal, received by British servicemen in recognition of their service to the Russian war effort.

Lord St Davids explained that permission to wear a foreign award was not normally given if it was offered more than five years after the event, or if an official British award had been instituted for the same period of service. The Russian medal was not instituted until 1985 and the contribution of British servicemen had already been recognised by the award of the Atlantic Star.

But Lord Boyd-Carpenter, a former Tory minister, said the regulations appeared to be unduly restrictive. 'In the particular case of those who faced all the risks and dangers of the Russian convoys and received a very proper reward, an exception should be made.'

Lord Mayhew, a Liberal Democrat and former defence minister, thought the minister 'ungenerous'. 'There is a unique feature in this medal - namely the extremely grudging attitude of Stalin and his government to the bravery of these people at the time. It may well be a most appropriate thing that the new Russian government should wipe that out by a commemorative medal.'

Harriet Harman might have wished an outing in the northern oceans upon Mr Portillo as he persisted in comparing her to Joan Collins, but all she could manage was mild admonition that he should 'clean up his jokes'. Mr Portillo had noted that unlike a real Chief Secretary, Ms Harman wanted more spending all round. 'Like that other mega-star that she so closely resembles - I am, of course, referring to Joan Collins - she likes to have the most expensive of everything. And like so many of Joan Collins's screen roles, she can't say 'no'.'