Blair plans to dodge income tax pledge with 'progressive charging' scheme

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Indy Politics

Tony Blair, who wants to retain Labour's pledge not to raise income tax rates, has asked Downing Street officials to study extending charges for some services to close a potential "black hole" in the Government's finances.

Under the "fair charging" scheme, the fees would be related to ability to pay and poor people could escape them. But the move is bound to provoke criticism from within the Labour Party that it would result in two-tier services.

"Progressive charging" could be introduced for a planned nationwide system of child care and adult education and training, and some help provided by social services. In some cases, those who could afford to could top up the basic state provision. For example, old people could be given a voucher for home helps, home adaptations and home-delivered meals, and then use their money to buy a better service.

Ministers are wary of embarking on what might be seen as an attack on the middle-class voters wooed by Mr Blair. But they believe they can "sell", on grounds of fairness, the idea that the better-off should contribute more towards the cost of improving services for all.

Peter Hain, the Leader of the Commons, was slapped down by Mr Blair 10 days ago when he hinted that the rich should pay more tax to ease the burden on middle-income groups. The Labour manifesto at the next general election is expected to retain Mr Blair's promise not to raise tax rates, but to leave the door open to new charges and a further increase in national insurance.

Independent experts have predicted that the Government will face a black hole of up to £12bn in the next few years and will have to choose between higher taxation, cuts in spending or increases in borrowing.

One Blair aide said: "If we want to improve public services and expand welfare, we will have to look at progressive charging."

Another said the Government had already made the tax system more progressive but added: "We must persuade the affluent to pay towards the expansion of welfare. If we don't address it, we won't leave the starting blocks."

Government sources say progressive charging has already been implemented in proposals for university top-up fees.