The government will fight proposals to put VAT on children's clothes

At a meeting of EU finance ministers in Italy over the weekend, Mr Brown signalled his firm opposition to the plans.

"We will not allow taxation to be imposed on children's shoes or children's clothes. It does not make sense," he said.

Speaking ahead of the meeting, Mr Brown told the BBC that Britain's opposition to the proposals was supported by other EU countries, and said he expected them to be dropped.

"We have said right from the beginning that Britain will not accept taxation imposed on children's shoes and clothes," he said.

"That is in the national interest of Britain but it is also now accepted by many other members of the European community, and I believe, over the next few months, we will see the proposal dropped."

Mr Brown said taxing children's clothes would be a "socially regressive" move.

The Treasury has previously suggested Britain may use its veto to protect the tax exemption on children's clothes, which Prime Minister Tony Blair pledged to retain in Labour's 2001 election manifesto.

Harmonisation

The EU proposals are aimed at bringing Britain's VAT rates into line with other European countries by trimming the number of areas where zero rating applies.

The European Commission argues that VAT exemptions distort trade in the EU by subsidising sales in one country at the expense of another.

It points to studies showing that children's wear is more expensive in Britain than in countries where the tax is fully applied.

Frits Bolkestein, the European Commissioner with responsibility for taxation, has called for a more "level playing field," and says EU tax rules should be more "logical and coherent".

Launching the proposal he said: "The current VAT arrangements in the EU are a dog's breakfast, and it is our job to try to simplify the rules on reduced rates to improve the functioning of the single market and avoid potential distortions of competition."

Unanimity in doubt

The BBC's Europe business correspondent Patrick Bartlett, said: "According to Brussels, clothes manufacturers and retailers are pocketing the saving instead of passing it on to consumers.

"The accusation is vigorously denied both by the government and retailers who say price competition in the clothing market is extremely tough."

The Republic of Ireland also does not charge VAT on children's clothes and Luxembourg charges "super reduced" rates.

The change in tax requires unanimous approval, and is therefore reckoned to have little chance of getting through.