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EDITIONS
 Tuesday, 16 April, 2002, 09:57 GMT 10:57 UK
Public sceptical of tax rises
Concern is growing in Labour Party circles about the political consequences of Wednesday's Budget, the first since Labour returned to power in June 2001.

Gordon Brown is widely expected to raise taxes by at least 5bn to fund further spending increases for the National Health Service and education.

Chancellor Gordon Brown
Will tax rises be delayed?
But the latest opinion poll from NOP for the Bradford & Bingley suggests that only 46% of the public support such an increase, while 49% want to see taxes cut.

And a separate poll by ICM says that 58% of the public does not believe that higher taxes will lead to improvements in the NHS over the next few years, while only 35% say it will get better.

The Prime Minister and the chancellor have been engaged in last minute discussions on how to ease the pain from any tax increases which would hit middle class voters.

The main tax increases are expected to fall on National Insurance payments, but stamp duty on higher-priced houses could also rise.

One possibility is that the tax increases will be phased in over several years with no major increases this April.

And there is further speculation that, with oil prices rising, petrol duty will be frozen for the second year in a row.

David Begg, the government's transport adviser, has urged the chancellor to reject a freeze, arguing that "there could be no reduction in congestion if the cost of motoring continues to fall".

Sugaring the pill

The chancellor is expected to make up to 2bn available to boost the take-home pay of low-paid workers, extending the working families tax credit to single people and childless couples.

The new child tax credit - which is part of the planned reform - will also boost the incomes of people who stay at home to look after children.

And Mr Brown is expected to make the new credit available to the same group of middle income families who now qualify for existing benefits.

However, the new scheme will take account of joint household income, while previous child tax credits only took account of the income of the highest earner.

Future spending plans

The Budget decision is particularly important this year because in July the government will fix its spending plans for the next three years until the next General Election.

Further spending commitments are expected on health, education, transport and crime.

The government has been keen to stress that it is making a long-term investment in the future of public services that will be accompanied by significant reforms.

But Mr Brown has argued that the big rise in health spending must be financed through the public purse.

The Wanless Report into NHS funding - also expected to be published on Wednesday - is likely to endorse Labour's commitment to paying for health through general taxation.

The Conservatives say Labour's extra millions for the NHS will be wasted without wholesale reform of the system.

And they want a debate on alternative methods of funding, including the use of social insurance schemes which are common in the rest of Europe.

Economic prosperity

Meanwhile, an economic think tank has warned that big tax increases could hurt the economy.

The Centre for Economics & Business Research says that a tax rise of 10bn could lead to a "significant detrimental impact on the UK economy" with GDP (gross domestic product) dropping by 13.3bn, or 500 per person.

It also says that "Britain is not a low-tax economy", with tax bills on personal income and wealth already higher than in France, Germany, Italy and Spain.

But Mr Blair has been careful to stress he and Mr Brown would not throw away Labour's hard-won reputation for economic prudence.

He says the Budget would make Britain the most competitive and entrepreneurial economy in Europe.

The NOP poll was based on a sample of 979 people interviewed by telephone between 5 and 7 April. The ICM poll interviewed 1,001 people between 12 and 14 April.

 VOTE RESULTS
Would you pay more tax to fund the NHS?

Yes
 38.79% 

No
 61.21% 

14319 Votes Cast

Results are indicative and may not reflect public opinion


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See also:

15 Apr 02 | Politics
14 Apr 02 | Politics
08 Apr 02 | Business
26 Mar 02 | Business
07 Mar 02 | Business
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