As strike bites, unions press Brown to raise taxes on rich

Gordon Brown is under mounting pressure to raise taxes for high earners so he can reduce the tax burden on low-income families struggling as the economic slowdown begins to bite. Some ministers are urging the Prime Minister to "be bold" by risking tax rises for people earning more than £100,000 a year.

The issue will surface next week when Mr Brown attends an important meeting of Labour's policy forum at Warwick University to discuss the party's next election manifesto. Ministers will try to negotiate a new deal on policy with the trade unions: they contribute more than 90 per cent of the party's income. The three biggest unions – Unite, the GMB and Unison – have called for tax rises for the rich in amendments to draft policy statements. So have many constituency Labour parties.

The unions want an increase of the threshold at which national insurance starts from £3,500 to £5,000, and a cut for people earning up to £40,000 a year, funded by higher contributions for people earning over £100,000.

Some local parties are calling for a return of the 10p lower rate of tax abolished by Mr Brown last year, which left 5.3 million low-income earners worse off until he funded a £2.7bn compensation package.

Senior ministers will resist demands for tax rises, saying the forum is not the right place to decide tax policy. But the issue will be raised again at Labour's annual conference in September.

One cabinet minister said: "There is a debate about tax at the highest level of the Government. Some people are arguing that we should raise more from the top to help those at the bottom." But another minister warned that such a move would be "suicide" and mark the end of New Labour.

A wave of industrial unrest hit town halls and other public offices across the country yesterday, as council workers began a two-day strike after rejecting a below inflation wage offer.

Union officers claimed that more than 500,000 people were on strike, which would make it one of Britain's biggest industrial disputes for decades, in terms of the numbers involved, though there were wildly different claims from the employers, who put the number of strikers at 100,000.

There were also rallies and marches in numerous towns around the country in support of the action. The Local Government Association, which negotiates nationally for local councils, has made a below-inflation pay offer of 2.45 per cent to its 1.3 million employees on the lower pay grades, who include teaching assistants, refuse collectors and social workers.

The strike disrupted hundreds of schools, libraries council offices and other premises, particularly in the north of England, though the impact on the economy was less than in other big disputes because council workers lack the industrial muscle to close major industrial plants or disrupt transport. Unison is demanding a 6 per cent pay rise or 50p an hour, whichever is greater. One in four of the affected workers are paid less than £6.50 an hour.

"It is not easy to take strike action but members are upset and angry at the way they are being treated," the union's general secretary, Dave Prentis, said. "My door is always open to the employers and they should act now before morale plummets to an all-time low."

Jan Parkinson, for the employers, said: "These strikes will not change the fact that our last offer was our final offer. Our greatest asset is our staff but we have simply reached the limit of what is affordable. Any higher offer would have to be funded through increases in council tax or cuts to essential services."

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