Brown welcomes progress on VAT cuts

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Speaking at the end of a two-day summit in Brussels, the Prime Minister said that the leaders had made "substantial progress" on the issue.

"I think people have been persuaded by the argument that we should look at this very carefully," he said

"VAT is a uniquely European tax, Europe has now got an energy policy to cut carbon emissions.

"If - whether it be fridges or household goods generally, or whether it be the insulation materials that make for more energy efficient homes - we can cut the rates of VAT, then I believe that will be a good thing for Europe.

"So the debate has started, we have got this review happening, I believe that that is very substantial progress in only two days.

"Over the next few months I think other countries will join the debate that France and Britain have already started."

French president Nicolas Sarkozy also welcomed the fact that the European Commission was now "mandated" to look into possible tax breaks via reduced VAT charges on green goods. But he added: "Certain countries were not happy with the reopening of the VAT debate, but Britain and France are very favourable towards having this discussion."

President Sarkozy said he and Mr Brown had been adamant at the summit that the climate change commitments already entered into by the EU should be firm commitments and not merely "pointers" towards future action. "It is important that Europe sticks to its commitments," insisted the French president.

The summit reaffirmed pledges made a year ago to cut CO2 emissions by 20% by 2020 compared with 1990 levels, but went further today by setting a deadline to turn the promise into legislation within a year.