Labour and Tories in 'tax cuts war'

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A bidding war to help people through the financial crisis by cutting taxes has begun between Labour and the Conservative Party, after Gordon Brown hinted that the Government would announce a substantial programme of tax cuts later this month.

The Prime Minister has said there was an "emerging consensus" that tax cuts were needed alongside the surprise 1.5 per cent interest rate cut announced by the Bank of England.

The Chancellor, Alistair Darling, is expected to announce a multibillion-pound tax cutting programme, funded through increased borrowing, in the pre-Budget report. He has not yet made a decision on how the cuts will be introduced but an extension to tax credits and the winter fuel allowance are among measures thought to be under consideration.

The Conservative leader, David Cameron, has also hinted tax cuts are needed, but said he would not increase borrowing. The Conservatives are expected to announce a "funded" tax cut measure this week. The Tories have promised to freeze council tax for two years, increase the inheritance threshold and allow businesses to delay VAT payments. Senior Conservative figures criticised the Government's policy of increased borrowing. The shadow Defence Secretary, Liam Fox, said Gordon Brown appeared to have "maxed out the country's credit card" and now wanted to "open another one".

The ICM opinion poll for The Sunday Telegraph showed the Conservatives are still 13 points ahead of Labour on 43 per cent, despite Labour's strong showing in the Glenrothes by-election.