UK Treasury Minister Foreshadows Increased Taxation

by Jason Gorringe, Tax-News.com, London

25 January 2002

UK Minister Andrew Smith, Chief Secretary to the Treasury, said on Wednesday that taxes could rise in the upcoming budget to pay for increases in spending on the National Health Service. But Mr Smith insisted that the government would honour its general election pledges not to increase the basic or upper rates of income tax or put VAT on food, children's clothes or books.

One day after it was announced that government borrowing in December was higher than for any month since 1977 at £5.4bn, Mr Smith's comments sent out a message to ministers in spending departments that Gordon Brown, the chancellor, was not ready to sanction further growth in public service investment if it would undermine Britain's economic stability.

Speaking from Brussels, where he is attending a gathering of EU finance ministers, Andrew Smith told BBC Radio the borrowing figures were in line with the ''tough fiscal rules'' set by Mr Brown, which rule out borrowing for day-to-day needs. But he acknowledged that the government's plans for significant above-inflation increases in spending on public services such as health, education, and transport may require a rise in taxation in the budget in March.

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