Page last updated at 18:05 GMT, Saturday, 29 November 2008

Top earners 'to share sacrifice'

Gordon Brown
Cutting VAT was "quick acting" Mr Brown said.

The prime minister has defended raising the tax bracket for top earners, saying that they must "share the sacrifice".

A new 45% higher income tax rate is proposed for earnings above 150,000 from April 2011.

The move was made "not on the basis of envy but to share the sacrifice that's necessary to take us through difficult times," Gordon Brown said.

He also said that action to get banks lending to small firms again would come "in the next few days".

This is the biggest New Labour project of all, giving people confidence and hope that we can get through this downturn into a better economy and society
Gordon Brown

Banks, some of who are set to share in a 37bn government bail-out, have been choosing to hoard cash to bolster their balance sheets, rather than offer loans at affordable rates.

Sharp falls in interest rates have not been fully passed on to consumers because the costs for banks to borrow money themselves have remained high.

Speaking at a conference held by think-tank Progress, Mr Brown defended his 20bn stimulus package aimed at kick-starting the economy and getting people through the crisis.

"This is the biggest New Labour project of all, giving people confidence and hope that we can get through this downturn into a better economy and society," he said.

And the stimulus efforts were not just about cutting Value Added Tax (VAT) but also investing in public works, pensions and child benefit, he said.

Reducing VAT from 17.5% to 15% for 13 months from Monday was the right move, Mr Brown said, because it was "quick acting, everybody benefits and things can start straight away".

'Alive and motoring'

The prime minister denied claims the government had abandoned the principles of New Labour, a view shared by the Business Secretary Peter Mandelson.

Lord Mandelson says he is 'confident' of a recovery in 2009

Lord Mandelson said: "I think new Labour is alive and motoring.

"We've been in government for 10 years but what people are thinking about is the future.

"... if we are going to present ourselves at the next election to the public as a winning force, we're going to be judged, not just by our record, but what we can do for the future of this country."

Work and Pensions Secretary James Purnell also denied accusations that the government's economic rescue package represented "the death of New Labour".

He also said: "Gordon Brown and Alistair Darling have rightly been congratulated for helping lead the world's response to the credit crunch. But if we think that we will be rewarded in the long term for that fact alone, we will be making a mistake."

The audience heard him describe New Labour slogans such as "For the many, not the few" and "Education, education, education" as "stale" but still inherently correct in their message.

"Far from being abandoned, these ideas need to be renewed by applying them to today's changed circumstances, " he said.

Policy reports

Speakers at the conference urged the government to radically overhaul the benefits system - including making more single parents work, funding universal childcare and providing higher maternity leave payments.

Other plans include giving private firms and charities the right to bid to run more public services.

The organisation is launching policy reports in five different areas - public services, welfare, immigration, crime and justice and foreign policy.

Under the plans, which have been devised by former cabinet minister Alan Milburn, 10-year "franchises" for services such as GPs and colleges would be up for tender.

Others proposals include making grant-funded students who drop out of university pay back part or all the money.

Also, forcing local authorities to spend more money on youth services and the creation of civilian security force consisting of military trainers, civil servants, police officers, judges and other logistical staff.

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