We should all be deeply concerned by the Government's proposal to levy VAT on new housing - not only for its effect on house prices.

The previous Conservative administration fought hard to secure a UK exemption on this tax from Brussels. It is unbelievable that, given the increasing control Brussels is placing on domestic affairs, the present Government is prepared to throw away this valuable concession to subordinate the UK to Europe, most of which has completely different levels of housing ownership and therefore market conditions than the U.K.

Various prominent housebuilders have commented on the impact VAT will have on land values but McCarthy & Stone is most concerned about its effect on house price inflation. It is truly naive to believe that such a tax would be absorbed in its entirety by housebuilders or land owners, or that it will only affect the price of new homes.

Once the levy is charged, part of the cost will inevitably be passed to the buyer. The effect will be to add to inflation which the Government and the Bank of England are so keen to control.

John Prescott states that the tax will put new-build on a par with redevelopment and "therefore encourage developers to refurbish old buildings rather than build new ones." What he fails to understand is that, often, it is totally impractical to refurbish existing buildings and new-build is the only way to maximise the development potential of many brownfield sites.

How can Mr Prescott promote brownfield development in one breath while discouraging it by this ludicrous proposal in the next?

The only deduction to draw from this absurd dichotomy is that, yet again, the Government is cynically dressing up a "stealth tax" in environmentally-friendly clothing.

JOHN S. McCARTHY, M.B.E.

Chairman, McCarthy & Stone plc

Dorset