Labour Leadership Battle: Blair targets tax-abuse 'playground': The favourite calls for a 'partnership economy' as rival emphasises her credentials

TONY BLAIR, the Labour leadership favourite, yesterday coupled the first detailed statement of his economic objectives with a warning that a government under his leadership would halt tax 'scams' which 'make a mockery of fairness'.

Mr Blair said: 'We must tackle abuse of the tax system. For those who can employ the right accountants, the tax system is a haven of scams, perks, City deals and profits . . . We should reward people who work hard and do well. We should not make our tax rules a playground for revenue avoiders and tax abusers who pay little or nothing while others pay more than their share.'

Mr Blair - in a speech which also held out the prospect of reforms on taxation of dividends - set out the goal of a 'partnership economy' which would include:

Radical changes to the tax system designed to boost research and development and individuals' chances to develop their skills, by fiscal relief for training and reforms of benefits to encourage recipients to take courses;

Partnership between government and industry, with the tax system encouraging exploitation of best technology;

Modern industrial relations, with the law 'balancing rights and responsibilities';

Immediate job creation, especially for the long-term and young unemployed.

He said: 'There are great British successes in industry but the levels of investment and new capacity have been wholly insufficient . . . The simple market-forces theory of the new right will not correct this. We need to move beyond the false choice between old- style intervention and the simple market theory of the new right.'

In his 25-page speech to the Engineering Employers' Federation in Birmingham, Mr Blair also heralded an assault on City short- termism - speculative share ownership which tends to militate against industrial investment. Mr Blair said that reforms would include 'facilitating long-term investment agreements between large companies and financial institutions; by reviewing regulation of financial markets to support moves for a more committed ownership; and by examining the tax treatment of share ownership with a view to rewarding longer-term holding of shares.'

Mr Blair said: 'The source of high dividend payments is clear: fear of takeover . . . If a company is in trouble, it is either allowed to go bankrupt or it is taken over. City institutions tend to play either a promoting or passive role in this context, eager to sell shares to the highest bidder. Rarely do they interfere in the actual running of the business.' He said Labour would look towards the example set by German, French and Japanese banks, of a more active and 'less destructive' method of corporate governance.