Lib Dems hint they will drop penny on income tax pledge

The Liberal Democrats gave a strong hint yesterday they were prepared to abolish their commitment to put a penny on income tax to raise money for education.

Matthew Taylor, the party's Shadow Chancellor, said he would abandon the 10-year-old pledge if Gordon Brown increased education spending in next week's Budget.

Launching the Lib Dems' Budget blueprint, Mr Taylor also promised more "investment than we have ever proposed before to rebuilding a world-class NHS".

He said the party's "alternative Budget" would provide an extra £4.4 bn each year for health and social services by the end of this parliament, paid for by a new "health tax" for the richest in society. A new 50p tax rate on income of more than £100,000 a year would pay for more hospitals, and nurses as well as no-fault compensation for patients and families who are the victims of medical negligence.

Low-paid nurses and midwives would get at least £10,000 more on average every year. Personal care costs for the elderly would be free.

The Liberal Democrats also indicated yesterday that they are prepared to introduce a local income tax to pay for improvements in education.

Mr Taylor told the BBC: "Labour said the money was not necessary before the election. Now it appears that they accept that we were right all along.

"If that money goes in and if that investment pays for the improvements we are looking for – for example in education – then we are not going to ask for the penny simply for the sake of it."

The party also put pressure on Mr Brown yesterday to make clear how close Britain was to joining the euro in his Budget.