Sunday, November 09, 2008

PM Gordon Brown has hinted at an emergency package of tax

Gordon BrownGordon Brown and David Cameron were locked in an extraordinary race to rebrand themselves as ambitious tax cutters today.

The Tory leader confirmed he will unveil a giveaway for business on Tuesday after Mr Brown stoked speculation that he is preparing his own tax-cutting plan.

With the economy diving into recession, the Prime Minister signalled last week that he is ready to borrow more to fund relief for hard-pressed families.

Today Downing Street seized on China's shock announcement that it will return £375 billion to its citizens as further proof of the need to "stimulate growth" world-wide.

Mr Brown's bullish language on tax cuts in recent days and his willingness to pile on the debt to pay for it surprised Westminster and has left the Tories reeling.

It fuelled speculation that the Pre-Budget Report later this month could see significant tax cuts, although Downing Street dismissed talk of a £15billion package as "made up".

Mr Cameron fought back today with a promise to bring forward proposals this week to help companies coping with wage bills and the threat of job losses.

He is under growing pressure inside his own party from those who want him to pursue a more robust right-wing approach to tax cuts.

But with the Conservatives committed to offering tax relief only if it can be paid for by savings or economic growth, his options are severely limited.

Mr Cameron made a virtue of his refusal to take on extra debt, pointing out that extra borrowing would have to be paid for later with higher taxes.

Writing in the News of the World, he said that in the UK the "cupboard is bare" and borrowing more would mean "the risk of higher interest rates - and mortgage bills - and higher taxes to pay off the debt tomorrow".

Mr Brown and Mr Cameron face demands for more help for those hit by the accelerating downturn, with economists warning that taxes are needed to jump-start the economy.

Until recently the Prime Minister was hamstrung by his self-imposed 'golden rules' that required him to keep debt under control and barred him from borrowing to fund tax cuts.

But as the extent of the recession has become clear Mr Brown has scrapped his rules and now claims Governments are entitled to borrow their way out of an economic crisis.

Since last week he has been trumpeting the promise of president-elect Barack Obama to deliver a £640 tax cut for every American family, as well as similar "fiscal stimulus" moves in Germany and China.

Buoyed by his unexpected success in the Glenrothes by-election last week, Mr Brown is keen to seize the language of tax cuts from the Tories.

Critics will point out that he has allowed borrowing to soar to record levels that will leave future governments facing painful choices between higher taxes or lower spending.

There will also be widespread scepticism about any "cuts" proposed by Mr Brown after his tax changes last year left thousands worse off.

Tory sources said the plan for business tax cuts to be published on Tuesday to coincide with new unemployment figures would be 'fully funded' out of savings from Government spending, but refused to give details.

The Liberal Democrats have been calling for targeted tax cuts for low and middle income workers, paid for by tax increases for the highest paid and £20bn of public spending cuts.

Responding to the Tory scheme, Treasury minister Ian Pearson accused Mr Cameron of sidelining George Osborne, whose reputation has suffered from the row over his links with russian billionaire Oleg Deripaska.

'It's remarkable that David Cameron feels the need to do George Osborne's job for him but it doesn't change the fact that the Tories are committed to putting fuel duty up for families and businesses, while making tax cuts for the wealthiest few estates their first priority.'

Shadow Work and Pensions Secretary Chris Grayling, who announced plans to enlist retired company bosses who survived the last recession to advise those experiencing one for the first time, said the party wanted to find solutions to help "the real economy".

Shadow defence secretary Liam Fox said the Tories were "instinctively" in favour of lower taxes but believed that reductions should be fully funded.

Mr Fox told BBC1's Politics Show the Conservatives wanted to see "practical solutions" such as delaying VAT for employers and freezing council tax for householders.

He said that Labour had "maxed out the country's credit card" and now Gordon Brown wanted to open another one.

Mr Fox said: "We said that any reductions in taxation which can actually help us, especially with small employers to stop shedding jobs, have to be fully funded.

"It's in very stark contrast to the current Government, which Gordon Brown seems to have maxed out the country's credit card and simply wants to open another one to keep spending.

"I think most people watching your programme will think to keep spending now and pass the debt onto the next generation is not a responsible thing to do."


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