Labour's Budget tax rise warning

THE Government today delivered a clear warning of tax rises to come in Chancellor Gordon Brown's Budget in March, with an increase in National Insurance payments the apparent front-runner.

Brown's deputy, Treasury Chief Secretary Andrew Smith, said the Government had sanctioned £50bn of rising investment in key public services, including increases in spending on transport, running at an average 25% a year, and health and education up 9%.

'We haven't ruled out the possibility of raising tax if that is what it takes to get the British public the NHS which they deserve and want,' he said. Smith's comments on the BBC's Today programme were swiftly reinforced by Health Secretary Alan Milburn, who declared: 'Nobody is ruling tax rises out.'

Smith said the Government would stick by Labour's General Election manifesto pledges not to raise the basic or upper rates of income tax, nor to bring in VAT on food, children's clothes, or books.

That, however, leaves the field wide open for the Chancellor to tighten the screw in other areas, including 'stealth' taxes achieved by failing to raise starting threshold levels in line with inflation.

Today's comments, following similar warnings from the Chancellor himself in the autumn, looked increasingly like a deliberate softening up exercise. The threat of Budget bad news was sharpened by new figures showing that Government borrowing rose to £5.4bn last month, the highest level for four years.

The path to possible tax rises was made easier by the latest opinion poll figures. The Prime Minister, despite the recent criticisms of his overseas trips and claims that he is failing to tackle problems at home, has seen his personal rating climb to 51%, compared with 44% last May. The poll, by ICM for The Guardian, shows Labour's lead over the Tories at a solid 15%, unchanged from a month ago.