New Leader of the House of Commons Peter Hain plunged the Government into controversy over tax plans today, when he called for those on higher incomes to pay more and admitted those on middle incomes were already paying too much.
Tony Blair, speaking at the EU summit in Greece, immediately distanced himself from Mr Hain, saying: "Tax policy is not going to change. We are not going to be raising the top rate of tax."
The Prime Minister added that he had not spent 10 years ensuring that Labour had secured a policy of not raising the top rate of income tax for it to be changed now.
The Treasury also slapped down Mr Hain, a close political ally of the Prime Minister, pointing out that only the Chancellor could change tax rates.
Mr Hain was at odds with Downing Street when he claimed they knew he was to address the issue in a speech in Wales tonight, but No 10 insisted they did not.
Mr Hain told BBC Radio 4's Today programme: "I'm saying, we face a situation equally where the top rate of tax, the 40 per cent band, now catches far too many middle income employees, including teachers and police officers.
"This presents us with hard choices. How can we ensure that hard–working middle income families and the low–paid get a better deal, except by those at the very top of the pay scale contributing more?
"Yet at the same time, how do we reward initiative, risk–taking and enterprise, all of which are crucial to generating wealth and economic success?"
Mr Hain would not be drawn on the top rate he envisaged.
But he said: "My view is that, in principle, those on very high incomes would be willing to contribute more provided, provided, we don't go back to the old punitive tax rate scene of successive Labour and Tory governments of the past, the old tax and spend.
"In that sense, the trajectory of our Labour Government will remain exactly the same.
"How do we balance these things? I'm not suggesting answers, I'm just saying we need to ask the question.
"How do we keep public investment high, the quality of public services high, (get) the reform to make sure that they are efficiently delivered, and at the same time get a fair tax system?"
He stressed: "I do not believe in high taxes for anybody ... I think the very rich might well be prepared to pay a bit more in the interests of fairness."
Shadow chancellor Michael Howard claimed Mr Hain's speech represented "the slipping of the last of the veils from New Labour".
He said: "They haven't learnt the lessons of the 1970s when under Labour tax levels rose to 98 per cent. They still don't understand that if high earners are taxed too heavily, they leave the country and take their abilities and their energies elsewhere.
"Of course, it is true that at all income levels people are paying too much tax under Labour. We have had 60 tax increases since 1997.
"They want to tax more, they want to spend more, and I'm afraid they will fail more."
Liberal Democrat treasury spokesman Mathew Taylor said: "Peter Hain has exposed Gordon Brown's dirty secret – that under Labour ordinary taxpayers are paying more while the very rich have been protected.
"A fairer tax system is long overdue and Peter Hain's proposals would hit too many people too hard.
"If Labour really want a fair tax system, they should axe the Council Tax and use a system based on income.
"Fairer income tax requires a 50 per cent rate on any income earned over £100,000, raising £4.5 billion per year and enabling the abolition of unfair stealth taxes like student tuition fees and health charges for the elderly."
A Treasury spokesman said: ""We have honoured and will honour in full all our Labour Party manifesto, including our commitment not to raise the top rate of income tax, while at the same time we have succeeded in honouring our promise to fund the NHS and our public services.
"It is the Chancellor in Budgets that makes decisions on taxation.
"At no point has Mr Hain raised this issue with the Treasury."
And a Downing Street spokeswoman said: "We were aware Peter Hain was making a speech, but not aware of its contents."
But Mr Hain told BBC Wales's Good Morning Wales programme that Downing Street did know he was to make the comments.
He was asked: "Did Downing Street know you were going to say this?"
Mr Hain replied: "Yes."
But he denied he was contradicting Labour's manifesto, saying: "We are not going to increase income tax before the next general election.
"For the future, for our society in the future, I'm making a long–term speech ranging across policy."Reuse content