Tax rises threat to trade, says Blair

PRIME Minister Tony Blair today sent out a stern warning that future tax rises would harm British business in its battle to remain competitive.

His comments appeared to be a clear message to Chancellor Gordon Brown that higher taxes would be politically dangerous. However, they were also aimed at other Cabinet ministers - such as Commons leader Peter Hain - who are advocating raising income tax rates.

The Chancellor has faced warnings from the City that falling revenues mean he will either have to put up taxes or increase borrowing, or both, to maintain growth.

Blair used a newspaper interview to endorse Brown's prediction that the way ahead will be 'tough'.

But he repeatedly hit out at higher taxation, lambasting a Liberal Democrat plan to bring in a new 50% top rate. The Prime Minister stressed the threat posed to Britain from countries with surging economies such as China and India.

He warned in The Times: 'You have also got to make sure that you remain competitive in your economy, including on the levels of taxation.'

Blair also reasserted his opposition to calling a referendum on the European Union's new constitution, claiming it would 'convulse' his Government for months.

With the Tories launching a drive to get a petition with one million signatures backing a national vote, the Prime Minister said: 'We are taken as having sold something out - we have not.' He said under the blueprint key decisions on tax, foreign policy and defence would still be taken by individual governments.