Blair looks to tax rises

Blair had to abandon TUC speech

		By Nick Assinder BBC News Online political correspondent

In many ways the prime minister's speech to public sector workers was the same one he should have delivered at the TUC and Labour Party conferences.

The first was abandoned altogether because it came on the day of the terrorist atrocities in the US.

The second was watered down because of the continuing fallout from the disaster - and no one at the conference was in the mood for a battle.

Strongest hint yet at tax rises

The message throughout, however, has been clear. The prime minister is not going to be deflected from his crusade to reform public services.

But his latest speech did contain one hugely significant change.

He made it crystal clear that he is ready to raise taxes to pay for big investments in the public services.

Previous hints

He told the meeting: "I don't believe the public is any longer fooled by the notion of short term tax cuts at the expense of long term investment.

"The issue is, how do they pay? Do they buy the services themselves, or do they pay collectively through taxation.

"For reasons of equity and efficiency, I prefer the latter route."

He and Chancellor Gordon Brown have previously dropped very coded hints that this was their policy.

But this was the first time it has been spelt out so starkly.

And the prime minister did it for two very good reasons.

Yearly increases

Firstly it is quite likely that the British economy will be hit by the global economic slowdown which has been made worse by the terrorist attacks.

The Chancellor is committed to current spending levels and Mr Blair has now promised that investment in the public services will increase year-on-year.

So the question that has been dogging the government since the election was - how are you going to meet the bills.

We now have the answer.

National insurance contributions and/or other taxes - though probably not income tax - will be raised.

Brown has promised continued spending

The second aim of the prime minister's speech was to set out a clear difference between the government and the Conservatives over the issue all are agreed will define this parliament.

The Tories have accepted that they got it wrong during the election campaign by failing to concentrate on the public services.

Labour, on the other hand, deliberately switched on to the issue in the latter part of the campaign in a successful attempt to seize the agenda and put the opposition on the back foot.

It worked, and new Tory leader Iain Duncan Smith has now insisted that improving public services is also at the top of his agenda.

Meeting the challenge

The prime minister is determined to meet this challenge head on and display clear ideological differences between the government and the opposition.

That divide is basically, in his view, a choice between the Tory approach of forcing people to pay for services privately and his desire to have improvements funded by taxation.

That approach may also help encourage unions deeply opposed to his plans to think again.

For the first time in a decade, voters are going to be asked whether they are prepared to live with higher taxes as a result of better public services.

It is a battle that is set to dominate the four or five years until the next election and could easily prove the single biggest issue during the next campaign.