Chancellor admits to reallocation of wealth

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Gordon Brown finally admitted he was redistributing wealth from the well-off to the working poor as he described himself as a socialist.

The man who has revelled in his reputation as the "Iron Chancellor" has repeatedly refused to admit his policies amount to redistribution. But his use of the "R-word" associated with Old Labour confirmed Labour is happy to fight the next election on its plans for higher spending on health and education and will not try to outbid the Tories on tax cuts.

Mr Brown said the Government was "redistributing" to entrepreneurs by cutting capital gains tax, as well as those on low incomes. "We're putting money into entrepreneurs, we're putting money into tackling child poverty. We're giving a balance that is right, so there is fairness and enterprise in our society," he told BBC Radio 4.

He said no one was being harmed by the Government's policies. "There is nobody suffering from what we are doing, because we have managed to make great advances on unemployment."

Later, Mr Brown was happy to use the "socialist" label eschewed by Tony Blair when he addressed a private meeting of MPs about Tuesday's Budget. He said "the essential questions for socialists" as they looked to the future included a recognition that the Government's "enterprise agenda" was not at odds with delivering social justice but a platform for it.

Although MPs who spoke at the meeting welcomed the Budget, some expressed concern about Mr Brown's failure to do more to help pensioners and manufacturing firms struggling because of the strong pound. Diane Abbott, MP for Hackney North and Stoke Newington, said Mr Brown had denied himself the ability to do much for business in his Budget because he had handed over the power to set the interest rate to the Bank of England. He had "given himself very little real power over the exchange rate".

Mr Brown defended his decision not to raise the basic state pension by more than 73p a week next month, saying a bigger across-the-board increase would involve raising taxes from working people who were less well-off than some rich pensioners.

He denied his Budget aimed at winning back disillusioned Labour voters in traditional heartlands. "Economic stability can deliver social justice. It is our constituents who would suffer most in a recession."

Michael Portillo, shadow chancellor, confirmed the Tories would match Labour's plans to increase spending on health and education if they win the election. While he attacked Mr Brown's "stealth taxes", he said the Tories were committed to public services.

But his deputy, David Heathcoat-Amory, shadow chief treasury secretary, told Sky News Mr Brown's spending plans were "irresponsible", because they committed resources four years ahead. "We agree with giving health and education a priority they've always needed. But it's unwise, for the whole of public expenditure, to lock in at such a high level for so long into the future. If the economy does go into a downturn ... they are going to be stuck with these huge commitments with a falling growth rate."

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