Exclusive: Admit you’ll have to raise taxes if you win next election, Ed Miliband told

Former Blair adviser says party should seek mandate to increase burden on the rich, while Tories claim Labour leader is ‘lurching to the left’

Political Editor

Labour must come clean with the public and admit it will need to raise taxes after the 2015 general election, a former adviser to Tony Blair and Gordon Brown has urged.

Writing in The Independent, Patrick Diamond argues that Ed Miliband should seek a clear mandate for higher taxes to help to clear the deficit – saying both Labour and the Conservatives are guilty of making “implausible promises” on the economy.

“The British political class is avoiding the honest debate we need about taxing and spending,” he writes. “It is vital that politicians open up a more serious conversation with the public about future choices.”

Mr Diamond’s intervention comes as Mr Miliband faces further Tory claims that Labour is “lurching to the left”, after he confirmed that his party might return some rail lines to public ownership.

A “Big Bang” renationalisation could cost £10bn and has been ruled out. But 19 of the 25 rail franchises are due to be renegotiated over the next five years, so a Labour government could allow a state-owned company to bid for or take over some of them.

The Labour leader told the BBC’s The Andrew Marr Show: “We are looking at all the options on the railways. We are not going to go back to old-style British Rail.”

He said Labour would be “pragmatic” but added: “We have got to recognise that the system at the moment has flaws in it. Passengers are paying high fares in this country and we are paying big subsidies from the taxpayer.”

Mr Diamond, a former Downing Street policy adviser, wants Labour to consider raising taxes for people on middle and higher incomes, with one increase earmarked for the NHS and social care. He also proposes curbs on tax relief on pension contributions for high earners and says that benefits for affluent pensioners should be redirected to social care.

Labour has promised to set out its tax and spending plans before the general election, which takes place a year on Wednesday. But the party leadership will be wary of handing ammunition to the Conservatives, who have already warned voters about a “Labour tax bombshell”.

The Institute for Fiscal Studies backed the call for a more open debate on tax. Paul Johnson, its director, said: “Post-election budgets do tend to involve large tax increases. These are big choices, and ones we should be discussing.”

Mr Johnson said that despite a recovering economy, several more years of tough fiscal decisions lay ahead. He said the Coalition’s plans implied further cuts, leaving most departmental budgets a third smaller in 2018 than they were in 2010. “Doing more through tax might well ratchet up the size of the stake and the tax take. On the other hand, spending on many public services will be at historically low levels, squeezed by increasing spending on pensions and debt interest,” he said.

Mr Miliband is said to be reluctant to impose tax rises on middle earners as this would undermine his pledge to rescue the “squeezed middle”. Labour is also cautious about a “health tax.” As Chancellor, Gordon Brown did raise National Insurance contributions by 1 per cent for the NHS in 2002. But such a move by Labour now would be seized on by the Tories as the tip of the iceberg. George Osborne has insisted that the Tories would not need any further tax rises after next year’s election – a claim doubted by some economists.

The Chancellor has pencilled in another £12bn of welfare cuts. The Liberal Democrats would stick with the Coalition’s balance, in which 80 per cent of the deficit-reduction programme is funded by cuts and 20 per cent by tax rises. Labour has pledged to clear the deficit by 2020 but hasn’t revealed how much would be achieved by cuts and tax increases. It has proposed higher taxes on the rich – including restoring a 50p rate on incomes over £150,000 a year and a mansion tax on homes worth more than £2m. It also plans a bankers’ bonus tax.

Mr Miliband said: “We’ve made very clear commitments that we won’t borrow more for day to day spending in 2015-16 and as soon as possible in the next parliament we’ll run a surplus on the current budget and have the national debt falling.… there won’t be lots of money to spend in the next parliament.”

Labour has promised tax cuts for low earners by bringing back a 10p rate on the first slice of taxable income. The Liberal Democrats want a further rise in the personal allowance to about £12,500. David Cameron has pledged to target any tax cuts on low income workers.

Health check: Labour plans drinking curbs

Labour is considering sweeping plans to curb drinking, smoking and eating junk food in  an attempt to ensure Britain becomes  a healthier nation and to reduce pressure on the NHS.

A leaked document, which forms part of Labour’s wholesale policy review, reveals that the “options for discussion” include a minimum alcohol price to deter young people from “pre-loading” before a night out; banning supermarkets from selling drinks near the entrance and ending TV adverts for food and drinks with high sugar, fat or salt content before the 9pm “watershed.”

The report also suggests the phasing out over five years of the £300m-a-year sponsorship of sport by drinks companies, which would hit several leading football clubs.  But Chuka Umunna, the shadow Business Secretary, said: “I think that’s highly unlikely. I honestly can’t see that happening.” He told BBC Radio 5 Live: “We’re not in the business of coming at people with a stick and forcing people to do things…. But let me be clear: we want to help people lead healthier lives and our politics is about empowering people to do things, whether individually or in their communities.“

The proposals are being pushed by Andy Burnham, the shadow Health Secretary. But not all of them are expected to be included in Labour’s manifesto amid fears that the party would face claims of planning a “nanny state.”

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