Schröder's left wing backs 'tax-the-rich' manifesto

Chancellor Gerhard Schröder's ruling Social Democrats won the support of left-wingers and trade unionists for a controversial "tax-the-rich" manifesto with which the party hopes to win Germany's general election this autumn.

The party's electoral programme, entitled Confidence in Germany, was leaked to the German media yesterday. It proposes a 3 per cent tax increase on earners with annual incomes of more than €250,000 (£169,000) and plans to stimulate domestic growth.

Other measures include a new citizens' insurance to replace present health insurance, increases in unemployment benefit for east German workers, the introduction of a minimum wage and the retention of laws which prevent companies laying off workers.

The measures have been criticised as a concession to the Social Democrats' (SPD) powerful left wing and as an attempt to win back voters encouraged by the emergence of a new radical left-wing party headed by "Red" Oskar Lafontaine, the former German finance minister, who resigned from the SPD last month.

But party officials insisted that it would abide by the government's unpopular Agenda 2010 programme to reform the economy. Left-wing party members welcomed the manifesto. "We believe the whole party will be able to give its backing to this," said Andrea Nahles, a left-wing member of the party leadership. Germany's unions, which had opposed Mr Schröder's reform agenda, said they also approved.

Germany's opposition conservatives yesterday unveiled plans to cut top earners taxes from 42 to 39 per cent, if they win the autumn election. But the party also plans to increase value added tax from 16 to 18 per cent to help fund regional state spending. The Social Democrats plan no increase in the rate of VAT.

Opinion polls show Angela Merkel, the conservative leader, is on course to win the general election.