Blair 'to rule out rise in income tax'

Tony Blair is set to rule out any rise in income tax rates when he stands for a third term, it was claimed today.

The pledge is being considered because research shows voters swayed by Tory claims that tax rises may be needed to pay for public spending.

A further rise in National Insurance, which last year went up by 1p in the pound to boost health spending, is unlikely to be ruled out, according to reports.

Freezing tax bands at the 22p basic rate and 40p top rate will dismay Left-wingers hoping Labour will be more radical if it is reelected-next year. Some MPs claim the ease with which Chancellor Gordon Brown raised National Insurance showed the public now accepted the case for higher direct taxation.

But there is concern among ministers that voters are unnerved by predictions of a "black hole" in public finances.

The respected Institute for Fiscal Studies warns tax rises of up to ?13 billion could be needed to fund existing spending promises. Ministers-think voters are also anxious about the future because of worries about the housing market and will vote for the party offering stability.

Downing Street moved to distance itself from proposals to increase inheritance tax to 50 per cent on estates worth over ?763,000, reflecting Mr Blair's cautious approach.

The Conservatives said Labour would still put up tax, claiming "stealth taxes" had already cost taxpayers the equivalent of a 16p leap in the basic rate.