Labour sheds its 'tax and spend' policy

A NEW training levy on business, to be paid directly to employees, and use of the planning system to direct industrial investment, are being considered by the Labour Party in an important shift in economic policy to be announced next month.

As part of the most decisive change yet from the party's traditional 'tax and spend' approach, Gordon Brown, the Shadow Chancellor, is expected to propose that existing tax and regional incentives to industry be used to reward employers committed to training a highly skilled workforce.

The move follows a recent meeting with the Tribune group of MPsat which Mr Brown floated the idea of doubling or trebling the training levy on business proposed in the party's 1992 election manifesto. The proposal was for 0.5 per cent of payroll costs to be levied from companies not providing satisfactory training.

In a departure from the historic trend of Labour policy, the money would be transferred directly to individual employees, to 'buy' their own training, rather than going to training quangos.

Mr Brown will hint at the methods by which a Labour government could mount a policy of industrial intervention without using public money. One notion is for the system of 'planning gain' - under which local authorities grant planning permission to developers if they also provide communal services such as roads or recreation facilities - to be extended to regional level.

One possibility is for permission for development to be granted in one region if the company agreed to build new plant in more deprived parts of the country.

Mr Brown will appeal to consumers in a series of policy speeches next month, laying emphasis on 'trust-busting' of monopolies and cartels, regulation of the banks and financial interests. He will also advocate 'green taxes' as an alternative to levying income tax from the middle and lower income groups. He has already dropped Labour's pre-election proposals for tax on lower income groups.

Other plans include proposals for G7 to discuss global exchange rate stability and for international controls on currency speculation. This week Chris Smith, the party's environment spokesman, will publish a self-financing 'green' plan to insulate and double-glaze every home in the country, creating 50,000 jobs.

This would be funded by allowing gas and electricity companies to levy a higher charge. Labour says the average family would save pounds 150 a year in energy bills. The party says that only 20 per cent of the 20 million homes in Britain are properly insulated.

Mr Smith said: 'It is a no-lose scheme, good for households, good for the environment and good for the utilities. If the Government does not take it up and run with it, it is even more stupid than I think it is already.'

Labour sources are defensive about suggestions that they are considering a switch from income tax to VAT and continued to insist yesterday that the only shift from direct to indirect tax actively being considered was the greater use of 'green' taxes, including taxes on polluting companies.