High earners should pay more tax, suggests Hain

Friday, 20 June 2003 12:00 AM

Commons Leader Peter Hain is expected to use a speech today to say that high earners should pay more tax so that those on lower incomes can pay less.

The minister is expected to suggest that people on average incomes such as teachers and police officers are now falling into the higher 40% band. He could propose a new 50 per cent rate on earnings over £50,000, and a 60 per cent rate above £100,000, allowing the basic rate ceiling to be lifted to £50,000.

'How can we ensure that hard-working middle-income families and the low paid get a better deal, except by those at the very top of the pay scale contributing more,' he will argue.

At present, the basic rate of tax is 22% on earnings up to £35,115.

However the Treasury have already dismissed the suggestions, which run counter to the Labour Party's manifesto commitment not to raise the top rate of income tax during the current parliament.

A spokesman told the BBC: 'At no stage has Peter Hain raised these issues with the Treasury.' They added that it is Gordon Brown who makes decisions on taxation.

The minister's comments have caused strong political reaction, with the Conservatives accusing the Government of reverting to form and seeking to tax the British public beyond what is fiscally sound.

Shadow Chancellor Michael Howard claimed that what was being seen amounted to 'the slipping of the last of the veils from New Labour and it's laying bare Old Labour red in tooth and claw'.

'Under Labour, tax levels rose to 98%; they still don't understand that if high earners are taxed too heavily, they leave the country and take their abilities and their energies elsewhere,' he remarked.

'Of course it's true that at all income levels people are paying too much tax under Labour; we've had 60 tax increases since 1997:

'And the trouble is they're not spending the money effectively. If you can't spend the money effectively, you always want more, so they want to tax more, they want to spend more and I'm afraid they will fail more.'

However, speaking on Sky News this morning , Mr Hain insisted on the need for a 'sensible, adult debate' on such issues.

He said that he encouraged a continued climate of 'economic stability, high employment, rewarding enterprise and risktaking and the monetary rewards that go with it.

But he added: 'At the same time (I am) saying that those who are very rich would be willing to pay a bit without going back to very high tax rates and not going back to the road of cutting public services'.

The cabinet minister was keen to stress that the Labour promise not to increase income tax during the current parliament would not be broken.

'But for the future and the rest of the decade, what sort of society does Britain want to be? We want high public services - they have to be paid for by taxes - but they have to be fair taxes'.

The Government had already 'done a lot in that direction' with tax credits to help those on low incomes and 'hard working famililes', he said, but suggested that more could be achieved.

However, Mr Hain repeatedly declined to propose a particular rate, insisting that such taxation figures were a matter for the Chancellor.

In his speech this evening, the Leader of the Commons is also expected to float ideas for compulsory voting in elections and more modernisation of the House of Lords.

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