UK Chancellor May Raise Indirect Taxes To Fund Spending

by Jason Gorringe, Tax-News.com, London

03 October 2001

Despite promises not to raise income tax, Chancellor Gordon Brown refused on Monday to rule out the possibility of increases in indirect taxes to pay for the government's ambitious spending plans.

Speaking at the Labour party conference in Brighton, Mr Brown warned of 'testing times' ahead, and said that unlike in America, there would be no state bailouts for industries such as airlines, which have been stricken by the events of September 11th.

However, he assured the conference that he was determined to press on with increased spending on schools, hospitals, the police and transport, despite the flagging global economy. 'Because our plans are not only good for social justice, but affordable for our country and right for our economy, we will hold to our three year public spending plans,' he insisted.

The Treasury Department's reticence on the issue of National Insurance contributions hints at the fact that the Chancellor is determined to leave himself at least a little 'wriggle room' in terms of taxation, having promised in the Labour Party election manifesto not to raise either the top or bottom rates of income tax, or extend the scope of VAT. The possibility that the salary thresholds at which the higher and lower rates of taxation are applied could be manipulated has also not been denied.

Michael Howard, the Treasury spokesman for the Conservative party, criticised his Labour counterpart following the speech, saying that he had failed to 'come clean' with the British people about the state of the economy.

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