VAT, 10p tax band, higher well-off: questions to stay

THE BLAIR MANIFESTO: TAX

Labour will spell out the firm detail of its tax commitments in the election manifesto, if not well beforehand, it was revealed yesterday.

The detail will cover three questions that were not answered in yesterday's draft manifesto, New Labour, New Life for Britain:

n whether, or when, Labour will reduce VAT on domestic power and fuel bills from 8 per cent to 5 per cent - the minimum level allowed by the European Union following the Government decision to extend it;

n plans for a new, 10p starting rate for income tax, including, possibly, the low-level income band it will help; and,

n whether Labour will introduce a new higher-rate income tax band for the well-off.

But the outline principles of Labour's tax regime were provided in abundance by yesterday's draft, which promised "fair taxes".

New Life for Britain said it wanted: "An internationally competitive and fair tax system that encourages work, savings and investment to help raise the level of sustainable growth."

However, it added: "Democratic socialism is not about high taxes on ordinary families. It is about social justice and a fair deal. Reducing the high marginal rates at the bottom end of the earning scale - often 70 or 80 per cent - is not only fair but desirable to encourage employment.

"Under new Labour there will be no return to the penal tax rates that existed under both Labour and Conservative governments in the 1970s, indeed we would like to reduce taxes for ordinary families, who have suffered enough."

It was estimated that the typical family had been asked to pay an extra pounds 2,000 in tax since the 1992 election, in direct breach of 1992 election promises.

The document also said that the political system, as well as the economy and society at large, "must rise to the new challenges of a different world". Reform of the House of Lords, devolution, a "revival" of civic government - including the possibility of elected mayors for large cities, a referendum on voting reform and a Freedom of Information Act were pledged.

In a section on "Leadership in the World", the document committed Labour to strong defence and a new agenda for reform in Europe.

Echoing Labour's view of the relationship between the individual and society at large, the document said: "Our vision of Europe is not that of a federal superstate, but an alliance of independent nations choosing to co-operate with one another to achieve the goals they cannot achieve alone."

But it insisted that alliances would be built by a Labour Government, within the European Union, to make sure that Europe became "open, outward- looking and anti-protectionist". It also said: "The issue of the single currency must be determined by a hard-headed look at its economic practicalities."

NICHOLAS TIMMINS

Public Policy Editor