Left wing think-tank, The Institute for Public Policy Research has warned the UK Chancellor Gordon Brown that in order to fund his ambitious spending plans for public services, he will need to raise revenue by the equivalent of 4p on income tax if the economic downturn worsens.
The warning follows a similar message from the Institute for Fiscal Studies three months ago, and will infuriate Tony Blair, who pledged not to raise income taxes during the recent general election, with Mr Brown's grudging support. The government has insisted that its spending plans are funded until 2003, which leaves the last two years of Labour's second term unaccounted for. However, the Institute's report, due to be issued on the eve of the Labour party conference, argues that Labour will have to raise £14 billion in taxes to sustain spending on schools and health during that period.
Senior economist at the IPPR, Peter Robinson also cautioned the government that having ruled out the possibility of direct tax increases, it should not attempt to disguise indirect tax increases as 'stealth taxes'. 'Tax policy cannot proceed on the basis that you can fool most of the people most of the time,' he observed.
In view of the timing of the report's release, the Institute has urged the government to launch a public debate about taxation policy at the party conference, advocating a more open and honest approach to the issue. This will doubtless please the Labour MPs and trade unionists who have been calling for a pledge from Mr Brown that public spending will not be put at risk by a recession. 'We are saying now is the time for this debate,' explained Matthew Taylor, director of the IPPR. 'We may be facing economic difficulties and we've reached a crossroads in this country. The government has done all it can without asking people if they are willing to make sacrifices and I do not know if that is tenable any longer.'
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