No new taxes? Read his lips

Brown pledge over rates leaves door open for future increases

Gordon Brown yesterday ruled out any increase in the basic or top rates of income tax - or any extension of value-added tax - while leaving the back door wide open for other tax increases.

In a London speech designed to kill Labour's image as the tax-and-spend party, the shadow Chancellor said: "A Labour government will not increase the basic rate of tax". "It is because we understand the importance of work that there will be no return to penal marginal rates at the top," Mr Brown said, "As a signal of the importance we attach to rewarding work, I want to make clear that I will not increase the top rate of tax."

Having confirmed the current basic rate of 23p in the pound and the top rate of 40p, Mr Brown repeated his hope of getting a new lower rate of 10p for low-earners.

But in a careful - and calculated - escape clause, he also said: "I will not make blanket commitments on each and every one of more than 200 tax exemptions, reliefs and allowances in the system, before we know all the economic circumstances we will face, including the true state of the public finances."

A Conservative source said last night that Mr Brown had closed off two tax-raising options - out of 200 - leaving the irresponsible impression that he was not planning to increase the tax burden.

That Conservative point was underlined by the fact that the present Government has repeatedly used tax allowances to squeeze more revenue out of the system. The rate of mortgage interest tax relief has been reduced, tax relief for profit-related pay is being phased out, and the married couple's allowance was frozen in the 1991 Budget.

But the point was also made by a senior Labour source that while Mr Brown had provided reassurance about Labour plans for income tax rates - he had left himself the "flexibility" to increase taxes. "He has not boxed himself in," The Independent was told. "If he had said there would be no change in tax, it would not have been credible."

The speech - in which Mr Brown confirmed that Labour would stick to Tory spending limits in its first two years of office, and maintain curbs on public sector pay (answering one of the eight key questions for the Labour party posed by The Independent two weeks ago) triggered strong reaction from across the political spectrum.

Kenneth Clarke, the Chancellor of the Exchequer, said: "Hell will freeze before Gordon Brown could control spending and keep tax down.

"We know that new Labour have made pledges worth pounds 30bn in the next Parliament. They have not withdrawn any of them. But time after time in this Parliament, new Labour have shown that they would increase spending and would have to put up taxes to pay for it."

Opposition parties, ranging from the Liberal Democrats to Plaid Cymru, also attacked the plans, dismissing them as "daft and irresponsible promises" and "punishing widows and pensioners". The Labour left-winger Ken Livingstone warned that Mr Brown might have to raise the top rate of tax to kill a consumer-led boom, and he said that 90 per cent of Labour MPs believed the tax system Mr Brown planned to keep intact was unfair.

Rodney Bickerstaffe, general secretary of Unison, said: "If the Labour Party say what they mean and mean what they say, and are committed to real social justice, attention will have to be given to the low paid and this will inevitably include public service workers. We ask for no favours. We ask for fairness."

But Mr Brown said: "With Labour, all public sector pay agreements must be financed from within the agreed departmental cash limits. Just as we will resist every other unreasonable demand on the public purse, we will resist unreasonable public sector pay demands."

He also promised "a comprehensive spending review" that would take a long-term and strategic view of public spending - to shift the balance from consumption to investment, from welfare to education.

"We reject the old Labour litmus test on spending," Mr Brown said; "that increasing the overall level of spending is proof of our socialist commitment." As for the possibility of increasing taxes, Mr Brown said: "We must have a fair tax system that treats individuals in an equitable way: not tolerating wide differences of treatment for individuals or companies in broadly similar circumstances.

"It also means fair treatment of men and women as individuals, and that over their lifetime individuals with similar incomes pay similar amounts of tax."

Mr Brown repeated Labour's commitment to a crack down on high earners "who abuse the tax system using scams, loopholes and dodges".