[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Friday, 20 June, 2003, 13:38 GMT 14:38 UK
Blair slaps down Hain on tax
Middle income earners increasingly fall into the 40% tax bracket
Tony Blair has slapped down cabinet minister Peter Hain over his suggestion that high earners should pay more tax.

The prime minister said there was no question of changing the government's tax policy.

Commons leader Mr Hain said too many people on average incomes - including teachers and police officers - now fall into the 40% income tax band.

He said there were "hard choices" ahead in terms of helping those on low and middle incomes - and that top earners might have to fork out more to help.

But Mr Blair, speaking from the EU summit in Greece, said: "People are getting somewhat over-excited about this. Tax policy is not going to change.

"We are not going to be raising the top rate of tax."

I'm a member of the cabinet, and I think I'm entitled to ask the question and ask for an honest debate about the future
Peter Hain

Asked if that would still be the case if Labour won the next general election he said he wouldn't write the manifesto now.

But he added that he wasn't about to change his position after spending ten years ensuring Labour were in a position to say they wouldn't raise tax rates.

He said there would "always be a debate" about the issue, but said government policy remained firm.

Earlier, the Treasury angrily rejected Mr Hain's comments, saying it is Chancellor Gordon Brown who makes decisions on taxation.

And there was confusion over whether Downing Street was aware that the minister was planning to make the controversial comments.

Entitled

Mr Hain said the prime minister's office knew he was planning to raise the tax issue in a speech in Cardiff later on Friday - but Downing Street said while it was aware of the speech, it only knew the "general" thrust of the speech.

The minister insisted he was simply trying to open up "a debate about reducing the inequality between those at the very top and those at the very bottom" of society.

He told BBC Radio 4's Today programme: "I'm a member of the cabinet, and I think I'm entitled to ask the question and ask for an honest debate about the future.

They want to tax more, they want to spend more and I am afraid they will fail more
Michael Howard

"Not about this year or the next Budget or the general election manifesto, but what sort of society we want."

Later Mr Hain sought to take the heat out of the row, saying he agreed "word for word" with Mr Blair's comments.

"We need a clear choice to be put to the British people," he said.

"Either you go back to the Tory cuts in public spending or you have a high public investment policy with good public services and a fair tax system."

But the Tories leapt on Mr Hain's comments, with shadow chancellor Michael Howard saying it represented "the slipping of the last of the veils from New Labour".

He said Labour had failed to learn the lessons from the 1970s and warned that high earners would leave the UK if taxes were raised.

'Dirty secret'

TAX RATES
Basic rate: 22% on earnings up to 35,115
40% rate comes in above this level
Raising basic rate to 50,000 would mean extra 51 a week for someone on 50,000 a year

Mr Howard told the Today programme: "They want to tax more, they want to spend more and I am afraid they will fail more."

Tory leader Iain Duncan Smith said it was a case of a split between Mr Blair and his "surrogate" Peter Hain and Gordon Brown's supporters.

Liberal Democrat treasury spokesman Mathew Taylor said Mr Hain's commments "exposed Gordon Brown's dirty secret - that under Labour ordinary taxpayers are paying more while the very rich have been protected".

Education Secretary Charles Clarke said he didn't want to comment on Mr Hain's speech.

Butr he added: "As for the subject as a whole, I think it is a very important debate to have."

He also told reporters at a briefing in Norwich: "There is a real issue for people particularly in London and the south east who are on a level of income not necessarily high by general standards there, which takes you into higher tax bracket. That's the key issue in the whole tax debate".

Mr Hain said Labour - through the chancellor's "brilliant" policy - had already done a lot to redistribute wealth through tax credits and the minimum wage.

'Hard choices'

But, quoting from his speech, he went on: "We face a situation where the top rate of tax - the 40% band - now catches far too many middle income employees including teachers and police officers.

Peter Hain

"This presents us with hard choices, how can we ensure that hard working middle income families and the low paid get a better deal except by those at the top of the pay scale contributing more?

"Yet at the same time how do we reward initiative, risk-taking and enterprise, all of which are crucial to generating wealth and economic success."

Mr Hain insisted it was not a case of "going back to the old days of tax and spend, punitive higher tax rates".

Mr Hain will also use his speech to attack "fat cat" pay deals, including the guarantee of huge pay-offs for failed company directors.

He is also expected to float ideas for compulsory voting in elections and more modernisation of the House of Lords.


WATCH AND LISTEN
The BBC's Laura Trevelyan
"The machinery of government was trying to undo the impact of what Hain had said"


Commons Leader Peter Hain
"In principle, those on very high incomes would be willing to contribute more"



SEE ALSO:
The misery of tax credit delays
27 May 03  |  Business
Brown's Budget 'over optimistic'
16 May 03  |  Politics
Top tax saving tips
10 Jun 03  |  Business
Small firms under tax attack
30 Apr 03  |  Business
Profile: Peter Hain
20 Jun 03  |  Politics


RELATED BBCi LINKS:


PRODUCTS AND SERVICES

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific