Brown pledges 10p tax, but no top rate rise

Gordon Brown, the shadow Chancellor, made explicit tax pledges in his keynote speech to Labour sympathisers from business in Westminster yesterday, writes Anthony Bevins. The following is an edited text

"My approach is not to tax and spend, but to save and invest," Gordon Brown said in summing up Labour's new Exchequer doctrine yesterday. "I have an iron commitment to stability in public finances.

"We will not spend for its own sake, but according to our priorities. We will organise the tax system around clear principles and values. And I have shown that we will make tough choices where necessary, and do so on a fair basis.

"But let nobody be in any doubt that we build from this platform of stability for a purpose. We do this so that we can equip our country for a prosperous future and raise the growth rate of our economy.

"So that we can ensure for all the best educational opportunities and the skills to cope with change. So that we can give those denied work the employment opportunities they need.

"So that we can, in partnership with business, create the conditions for the long-term investment they need to succeed - and so that we can create a fairer and more just society, that ensures not just work and opportunity for those who need it but security for those denied it.

"It is through applying our principles and by building a new trust on tax and spending with the British people that Britain will be better off with Labour."

At the start of his keynote speech to businessmen at the QEII centre at Westminster yesterday, Mr Brown said: "Britain needs a new approach that recognises that government can best advance the public interest not by suppressing markets - the old Labour view - or simply succumbing to them - the view of the right - but by equipping individuals and companies to succeed within them ...

"For the last 50 years this country has been held back by damaging cycles of boom and bust. The volatility has damaged the confidence that generates investment and is one of the key reasons why Britain has invested so much less than our competitors ...

"Low inflation is a precondition of sustainable growth. And we can only succeed in ensuring low inflation and interest rates through sound public finances based on a fair approach to spending and taxation ... In the past, Labour's correct commitment to the public interest has often led to a reflex commitment to more public ownership and increase public spending. No longer ... Before we can make any strategic decisions on public spending, we must be sure that existing resources are being spent as effectively as possible in advancing the public interest ...

"In addition to ... responsibilities for law and order and defence, the decisions of a Labour government will be guided by our three priorities: encouraging investment for the long-term, expanding employment, and opportunity and fairness ...

"Labour will take a firm and fair approach to public-sector pay. Decisions will be made with a view to retain, recruit and motivate staff. But these must be made within tough cash limits. With Labour, all public-sector pay agreements must be financed from within the agreed departmental cash limits ...

"Our programme requires no new spending commitments other than those financed by the windfall tax ... we will be making no new commitments in our manifesto which require additional spending.

"So our first Budget will not reopen overall spending allocations for the 1997-98 financial year ... Each departmental minister will want to use their first year to work out with their departments and permanent secretaries how they can overhaul existing spending so that ... spending is reordered to meet Labour's priorities in the 1998-99 financial year ...

"The key to ensuring the decent services we all want to see and keeping the tax burden down is improving the performance of our economy, cutting the bills of failure and ensuring the public and private sector work together for Labour priorities ...

"We have already made it clear that our approach to taxation will be based on our values: that the tax system must encourage work and opportunity for all, it must encourage investment and it must promote a fair society ... after 22 Tory tax rises since 1992 which have hit hard-working families, I want to make clear that a Labour government will not increase the basic rate of tax.

"It is because we understand the importance of work that there will be no return to penal marginal tax rates at the top. As a signal of the importance we attach to rewarding work, I want to make clear that I will not increase the top rate of tax ... And just as it cannot be right that the highest earners in Britain face penal marginal rates of tax, so it is wrong that some of the lowest-paid face effective marginal tax rates of 80 or 90 per cent, and, in some cases, over 100 per cent.

"Labour wants to tackle the problem of penal marginal tax rates facing the low-paid by introducing a new lower starting rate of tax ... My tax- cutting ambition is to introduce a new lower starting rate of tax of 10 pence to encourage work and help all hard-working families."