news/notes2009.04.23c

[Today's News] from [The Guardian]

Gordon Brown: 50p rate is not taxation for its own sake
PM says new top rate for highest earners is 'tax for a purpose' as Alistair Darling defends 'ludicrously optimistic' budget forecasts

Deborah Summers, politics editor
guardian.co.uk, Thursday 23 April 2009 10.42 BST
Article history

Alistair Darling today defended his controversial budget predictions on economic growth and spending, as Gordon Brown denied the new 50p top rate of tax would sound the death knell for New Labour.

The prime minister insisted the party remained committed to aspiration and opportunity for all, after the chancellor was accused of abandoning a key manifesto pledge when he announced yesterday a new top rate on income tax for those earning more than £150,000 a year.

Critics said it marked a return to the old Labour politics of class war, but at a Prince's Trust event in London the prime minister said in the midst of a global downturn it was right that the better off should contribute more.

"The point that I think we have got to accept is if we are going to give people opportunities they need for the future, then there has got to be a contribution by those who have the most and who have gained the most over the last few years," he said.

"This is not taxation for its own sake, it is tax for a purpose. This is Britain fighting back against the international recession, this is Britain taking bold action for recovery."

He said that he remained committed to the values which defined New Labour in the 1990s.

"What we are about is aspiration, we are about helping people get on, we are about a giving people new chances, we are about helping people make the most of their potential. New Labour, that's what we're about," he said.

Earlier, Darling was forced to deny his budget predictions were "ludicrously optimistic", insisting it was impossible to be certain about what would happen in four years time.

The chancellor spoke out after opposition parties described his growth forecasts – that the UK economy would return to growth by the end of this year and expand by 1.25% next year and 3.5% by 2011 – as "preposterous".

This morning Darling told the BBC Radio 4's Today programme: "At a time like this when the economy has had a shock to the system you have got to take action ... you can't carry on as if nothing has happened.

"There is a great deal of uncertainty [but] I think our economy will begin to grow."

Pressed on how a future government would fill a "black hole" in the public finances by 2013, Darling added: "To set out a budget for the next five years would not have been sensible.

"I set out a budget that I think is right for next year but if you look ahead you have to see how quickly the economy recovers.

"At this stage is very difficult to be absolutely certain about what will happen, for example, on tax; if the economy does well that will help us.

"What I tried to do yesterday is set out a sensible path, that is sustainable.

"We need to face up to the fact that we do have a lot of uncertainty out there. To try to write a budget for 2013 would be just plain daft. We have got to live within our means and ensure our finances are sustainable for the long term.

However, the chancellor admitted public spending would need to be reined in.

"I don't make any bones about the fact public spending does need to be rigorously examined," he said. "We do need to be rather more efficient."

He said the planned £5bn of efficiency savings could be found by cutting out "obvious things" which had been identified across departments.

George Osborne, the shadow chancellor, accused the government of putting off the need for public spending restraint.

He said: "A lot of the decisions taken yesterday were not real decisions; they were decisions to push it off until after the election.

"It was a kind of a 'mañana, mañana' approach and I don't think Britain can afford that these days."

And he warned the proposed new 50p income tax band for those earning more than £150,000 would not solve the country's problems.

"He tried to persuade people that he could solve all the problems that have mounted up over this decade of debt with a new 50% tax rate on people earning over £150,000 and I think the country has seen through that.

"They know there are serious problems and they know there are not serious answers from this government."

But Osborne admitted he could not guarantee the Conservatives would drop the new 50p top rate of tax if they won power.

"My priority will be trying to avoid the tax rise that comes in on anyone earning over £20,000. Not £150,000, £20,000.

"That's Labour's national insurance tax rise. A tax on jobs in a recovery," he said.