Months early, and they're off: Major and Blair trade election blows on tax

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John Major has accused Tony Blair of planning to slap an extra 10p in the pound tax on the lowest-paid, as both parties traded the first blows in what has already become, in effect, the 1997 election campaign.

The Tories are determined to paint Labour once again as the tax-and-spend party - remobilising the highly damaging "tax bombshell" scare of 1992, which was followed by post-election Conservative tax increases.

The speed and thoroughness with which the Tory machine yesterday pounced on Labour's long-term proposal for a 10p starting rate of tax put an end to any pretence that both sides are engaged in a phoney, pre-election skirmish. At the beginning of the week, Mr Major launched a savagely derisive attack on another key Labour policy, Scottish devolution.

Today, the assault continues with yet another hustings press conference on tax, this time from the Chancellor, Kenneth Clarke. The momentum is likely to be kept up even if the election itself does not come until next spring.

Opening yesterday's campaign with a Labour conference to woo the business community, Mr Blair offered a new partnership and new opportunities from Labour.

As evidence of "New Labour's" new approach, Mr Blair said there would be "no return to penal tax rates", add-ing: "It is our long-term objective to reduce high marginal rates for low-income families."

Spelling out the commitment, shadow Chancellor, Gordon Brown, wrote in a glossy prospectus for business that Labour eventually wanted "a new lower starting-rate of tax of 15 pence, or preferably 10 pence in the pound."

Mr Major immediately broke into a campaign tour of Buxton, Derbyshire, where he dropped a big hint that tough new laws to curb further strikes in the public sector could be in the offing - perhaps in the Queen's Speech in November. He told a group of business people in Derby: "Strikes are becoming a rarity, old-fashioned, outmoded, no longer relevant. I think they are no longer relevant and we should try and remove them entirely if we possibly can."

Attacking Labour's tax pledges, he said: "The day the Labour Party becomes tax-cutters you will hear cats bark, and not before."

Labour was playing a classic public relations trick, he said. Each year, Conservative chancellors raised the threshold at which low-paid employees paid tax, said Mr Major, adding that he suspected what Labour planned to do instead was to impose the new 10p rate on those people.

"They will say they are cutting and reducing taxes and the reality is they are increasing taxes, and until we have crystal clear details of what they will be doing, I think their claims will be greeted with some hilarity."

A spokesman for Mr Brown's office said: "That's mad; it's a gross distortion of the truth. It is the Conservative Government which has seen taxes rise, and millions more people brought into tax.

"What we want to do is reduce the rate at which people start to pay tax, so we can tackle the penal tax and benefit rates which are keeping people out of employment at the moment."

Treasury ministers replied that Labour's plans would cost pounds 8bn. But the Chancellor blundered on to the scene with a television soundbite in which he confused the narrow-band starting rate. Labour is proposing with the mainstream standard rate of 24p in the pound.

Mr Clarke said: "The electorate are more sensible than their politicians, they're more sensible than their journalists, and the electorate know that simply to try to outbid us by saying everybody's going to have a 10p standard rate costs billions and billions of pounds, which will wreck the enterprise economy in this country."

Conservative Central Office issued a transcript of a BBC radio interview with Mr Brown, in which he was challenged on the Tory costing of pounds 8bn.

He said the figure had been "plucked out of the air" - but he could not provide an alternative figure as it depended on the threshold and width of the new tax-band, neither of which had been decided.

Michael Jack, Financial Secretary to the Treasury, said: "The admission that the Labour Party cannot put a price on the cost of their 10p tax- band demonstrates that Labour cannot be trusted on tax."

As for Labour's actual proposal, the party has already said that it is aimed at the low-paid who currently suffer tax and benefit penalties - an effective marginal tax-rate - that can take every penny of any extra pound earned.

The latest tax-benefit tables produced by the Department of Social Security show that a married couple with two children, with one partner earning pounds 140 a week in full-time employment, would only get pounds 1.50 more a week from a pounds 50 pay rise. The marginal deduction rate of tax and benefit is 97p in the pound on every extra pound of income.

Labour is promising that its eventual 10p starting-rate of tax would be combined with action on the benefit "taper" - ensuring the tax cut was not clawed back through the benefit system.

Labour PR jamboree, page 2

Leading article, page 15

Analysis, page 16

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