Labour soothes business fears over tax

JOHN ARLIDGE

Scotland Correspondent

Tony Blair moved to tackle economic fears over Labour's plans for constitutional reform yesterday when he told Scottish business leaders that he had "no plans" to increase income tax north of the border.

The Labour leader reaffirmed his commitment to legislate for a Scottish parliament with revenue-raising powers in the first year of government. But he dismissed as "lies" Tory claims that the parliament would impose a "tartan tax". "The Labour Party has no plans to raise tax whether in Scotland or elsewhere," he said.

Addressing 500 senior businessmen and women in Edinburgh, Mr Blair said Labour's proposed parliament would have the power to raise income tax north of the border by up to 3 pence in the pound. It would be up to the Scottish Labour Party to draw up Labour's manifesto for elections to the new body but, he went on, the party as a whole had no plans to increase tax rates.

George Robertson, Labour's spokesman on Scottish affairs, who leads the Scottish party, strongly hinted that he would oppose tax-raising policies. "Any decision on tax would be taken with great prudence and care. It may be that we decide to live within the existing assigned budgets," he said.

Mr Blair's comments came after some of Scotland's leading employers - including Scottish and Newcastle, the brewing and leisure giant, and Weir Group engineers - called on Labour to abandon its devolution plans. Many industrialists fear that Labour politicians would use the proposed parliament's tax-raising powers, forcing up wage demands, fuelling inflation and discouraging inward investment.

Mr Blair insisted that their fears were unfounded. He was determined to initiate an "informed debate" on devolution. The more the policy was discussed, the more business would realise that it represented an "opportunity and not a threat".

A parliament would bring business closer to the country's decision-makers, he said, pledging that a Scottish parliament would not be able to change the business climate by varying corporation tax, or changing any regulatory regime in any sector.