The British public will be browned off with Labour’s tax hike…

Excerpt from the The Sunday Times (David Smith and David Cracknell, 20th March 2005)

TAXES will go up by £35 billion over the next four years under Labour, according to Gordon Brown's own figures.

Although it has been known that the tax burden would rise, the £35 billion figure is new and is an embarrassment for Labour. Tony Blair ran into a political storm last week for using this precise figure for Tory cuts, claiming it was equivalent to sacking every GP, nurse and teacher in the country.

Tax and spending are set to dominate the election agenda. Labour is to tear up the pledge card launched by Alan Milburn last month for a new one from the chancellor that promises not to raise income tax rates during the next parliament and highlights last week's budget help for pensioners.

Blair has summoned ministers to a cabinet meeting next week in the Easter recess to approve. Labour's manifesto and confirm May 5 as polling day.

Most of the increase will come through so-called "fiscal drag", as income tax allowances rise by less than earnings and people are dragged into paying more tax by stealth.

Since Labour was elected in 1997, more than 4m extra people are paying income tax — far outstripping the rise in employment — and 1.3m more are paying tax at the top 40% rate. Experts predict there will be another 750,000 higher-rate taxpayers in the next four years.

"Fiscal drag has been the biggest single tax increase under this chancellor," said one top accountant. "Income tax rates haven't changed since 1997 but receipts have doubled." A £50,000 earner will pay an extra £641 next year because of this, while a £100,000 earner will see their bill rise £1,319.

But experts warn even this will not be enough. The Ernst & Young Item club, which uses the Treasury's model of the economy, says Brown will need to introduce £10 billion of new taxes. Other independent bodies, including the Institute for Fiscal Studies and Price Waterhouse Coopers, agree.

"Brown is going to violate his golden rule and he will need to raise taxes at some point by £10 billion," said Professor Peter Spencer, chief economic adviser to Item, an independent forecasting group. Spencer predicts a £4 billion windfall tax on the banks next year, as well as other business tax hikes. Other economists believe the chancellor will repeat his 2002 tax hike, by raising £8 billion in higher National Insurance contributions from firms and employees.