Blair And Brown Bicker As Parties Make Their Tax Pledges

Robert Lee, Tax-news.com, London

05 September 2000

The last few days have seen a flurry of statements and pledges from the three main political parties over the clearly divisive issue of tax cuts. William Hague last week unveiled his mini-manifesto "Believe in Britain", in which he promised to roll back business taxes and regulations should the Conservatives win the next general election. Charles Kennedy's Liberal Democrats, on the other hand, say quite categorically that they are putting "social justice" over tax cuts. But most notably, there is division within the ruling Labour Party itself with Prime Minister Tony Blair and Chancellor Gordon Brown locked in a battle over whether Labour should promise to cut tax in its general election manifesto.

The Liberal Democrats' stance on tax cuts seems to be the clearest. They prefer to spend money on public services and have warned that "the desire for tax cuts must be curbed." Their mini-manifesto makes clear that the party's leadership is not interested in seeking electoral support with a low taxation policy. The document, entitled Freedom in a Liberal Society, warns: 'The next election must not be fought on bogus arguments about which party can reduce tax by the most, as if that were never at the expense of pensioners, children, the poor and the sick. Britain needs a wider vision for the 21st century.' The report suggests that while the less well-off in society should pay less tax, high-income earners should contribute more. That may translate into a commitment to raise the top rate of tax by 10p to 50p in the pound for those earning more than £100,000.

William Hague and the Conservatives have a clear agenda too. In a direct attempt to woo the business vote, they have pledged to curtail damaging taxes and regulations in order to make Britain the new economic capital of Europe. Hague wants to see the repeal of a 28-year-old Act which gives European law priority over UK law plus the scrapping , or at least the reform of the controversial IR 35 rules, which the government introduced to close a tax loophole for the self employed.

Deputy Prime Minister John Prescott quite wittily said of the Conservative pledges: 'It is an interesting title, Believing in Britain. The real problem for the Tory party is believing in the Tories. Nobody believes the Tories, either on their record of 18 years (in government) or on their promises, that change from month to month.' Yet, does Labour have room to talk, with Tony Blair and Gordon Brown sparring over tax cuts in the run up to this month's party conference, at which the party's proposals are due to be aired?

Mr Blair is determined to include some slashing of taxes in Labour's election manifesto to retain the Middle England vote. He has been stung by the accusation that his government, while pledging to keep taxes low, has been found guilty of raising them by stealth. He is certain that a tax cut promise would be popular with the middle classes in the key marginal constituences that Labour has to retain to keep its majority in the Commons. Mr Brown, however, wants to present manifesto pledges for traditional Labour voters and is vehemently opposed to any form of tax promise because he believes it could backfire on the Treasury if the economy takes a turn for the worse. He knows that such a pledge would infuriate Labour MPs and supporters in traditional heartland seats where there is anger at the way the strong pound has damaged local industry.

The row between Tony Blair and Gordon Brown has been largely hidden from view for fear it could prove damaging to Labour at such a critical time, given that a general election is probably only nine months away.

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