Gordon Brown will warn the Labour Party today that it cannot take long-term economic stability for granted, as he sets the scene for a cautious Budget next week and a tough cabinet negotiation over public spending.
The Chancellor is preparing for a Budget which will put the emphasis on prudence and stability in an attempt to rebut the Tory charge that he would be forced to raise taxes to fill a "black hole" in the nation's books. He will signal that spending outside the electorally sensitive areas of health and education will have to rise more slowly in the future when a new three-year spending blueprint is issued in July.
The Budget will include a clampdown on the tax avoidance industry to limit the estimated £13bn a year lost to the Exchequer. Mr Brown is expected to announce an American-style law requiring tax advisers to get permission from the authorities before selling their schemes. Gus O'Donnell, the permanent secretary at the Treasury, summoned the four leading accountancy firms - Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers - to the Treasury last night to warn them that the industry's integrity would suffer unless it curbed its aggressively marketed tax avoidance schemes. The Treasury is alarmed that some involve taking a "quick commission" from clients before the Inland Revenue is tipped off and the loopholes closed before clients benefit in the way advertised.
One scheme saw 1,000 people, most with incomes of more than £200,000, taking about £200m out of the system and paying almost no tax in the current year. Another measure allows 100 high street retailers to avoid about £300m in VAT.
The Tories launched a pre-emptive strike against the Budget by urging Mr Brown to "come clean" over the tax increases which they predict would follow a third Labour election victory.
Oliver Letwin, the shadow Chancellor, said the total tax burden had risen by £5,000 per year per household since Labour came to power in 1997. He said: "This isn't just about how much money Labour has already taken to fund Gordon Brown's spending binge. It's about how much more they intend to take in the future."
Pressure for a crackdown on tax avoidance came yesterday from MPs and trade unions. Debbie Coulter, the national officer for the GMB union, said: "Ordinary people pay their fair share of taxes and ... pay the penalty if they do not. They will be shocked to learn that many big businesses seem to think it is acceptable to attempt to bend ... tax rules to destruction."Reuse content