New Labour restates its stance with Brown's pledge on tax

Gordon Brown will fight the general election on a promise that Labour will not raise the 20p-in-the-pound rate of income tax, The Independent has learnt. After the Government announced plans to increase the top rate from 40p to 45p on earnings over £150,000 a year from 2011, it was widely assumed that Labour would abandon the manifesto pledge it has made since the 1997 election not to increase the basic or higher tax rates.

But ministers, including Mr Brown himself, have been stung by criticism that the U-turn on top-rate tax spells the end of New Labour and a decisive break with the Blair era. In an attempt to defuse Tory claims of a "tax bombshell", they say Labour will include a promise not to raise the basic rate in its next manifesto. One minister said: "We need to send a reassuring signal to the majority of taxpayers that there is no hidden agenda. Maintaining the pledge for the basic rate is an obvious way to do that."

Related articles

• Treasury pushed to reveal VAT hike 'impact'
• Darling on the defensive over 'unravelling' Budget
• Two weeks to cut rates, card issuers told
• Leading article: Ministers should concentrate their fire on the banks
• Banks 'must free up lending to small businesses'
• Credit-card lenders ease pressure on borrowers
• The Sketch: Anything interesting you say may be twisted and used against you
• EU unveils €200bn plan for recovery
• Ex-Fed chairman Volcker joins Obama's economic recovery team
• M&B scraps dividend until 2010 to tackle debts
• London-based AIG head at heart of US inquiry
• Record $34bn Bell Canada buyout is close to collapse
• China makes biggest cut in interest rates for 10 years to allay crisis
• Jeremy Warner: Government is guilty of double-talk over bank lending
• Credit crisis diary: Duty rise plan scotched by oversight on VAT
• Search the news archive for more stories

In the Commons yesterday, the Tory leader, David Cameron, told Mr Brown: "Isn't the real lesson from the pre-Budget report this: the country's going bankrupt, he's been found out, and New Labour's dead."

But Lord Mandelson, one of New Labour's architects, sought to reassure businessmen and voters that the Brown Government had not abandoned the policies pursued by the Blair administration. In a speech to the Institute of Directors in London last night, the Secretary of State for Business recalled that he once said New Labour had "no problem with people becoming very rich, as long as they pay their taxes". He added: "The New Labour principle still stands: we will only tax out of need, not out of envy or spite."

Lord Mandelson went on: "It is the times that have changed, not New Labour. New Labour is about more than just the top tax rate. It is, above all, about maintaining stability in our economy to give business the confidence and predictability to invest. It is about sustaining an enterprise culture as the foundation of a strong society."

Despite claims that the pre-Budget report marked a departure from New Labour, Lord Mandelson said the party remained camped firmly on the political centre ground.

"It won't change, however much those to the right and to the left of us would like to drag us off this mainstream, centre ground. This is where New Labour stands and this is where New Labour will remain."

Insisting that the "New Labour fundamentals" had not changed one iota, he added: "We also still stand for rewarding hard work and entrepreneurial risk. New Labour also continues to recognise that the progressive commitment to strong public services is matched by the obligation to reform and to ensure value for every pound of public money spent." Lord Mandelson said Monday's mini-Budget did not reverse that commitment but had tested and proved it in the toughest possible circumstances.

Privately, some Blairite MPs are worried that the decision to raise the top tax rate could backfire. But Alastair Campbell, who was Mr Blair's director of communications for nine years, said the former prime minister would have reached the same decision if he was still in Downing Street during such an economic crisis. He added: "I don't believe this is an ideological thing. The most important facet of New Labour is fairness. The other is boldness. What you saw was Alistair Darling taking pretty difficult medium- and long-term decisions."