Budget '99: Higher tax by stealth

Labour's election pledge has been broken, says Francis Maude

Budgets are about one thing and one thing only - tax. For this one day each year, the whole nation's attention is focused on tax: which taxes have gone up and down and by how much.

This government has tried to be very clever on tax. Elected on a promise not to raise tax ("We have no plans to increase tax at all," said Tony Blair in September 1996), Labour has in fact presided over a huge increase in taxation, although in a stealthy, devious way.

So the first thing I would say about this week's Budget is that it should be seen in the context of the tax rises that Labour has already set in train.

In recent weeks we have been trying to highlight the "stealth" taxes which Labour has raised since it came to power. Extra taxes on pension funds, on mortgages, on marriage, on petrol, on company cars, on house purchases, on medical insurance, and on businesses.

These taxes mean, even if Gordon Brown stands up on Tuesday and says nothing, we will be paying pounds 40bn extra tax over the course of this Parliament - that is the equivalent of about pounds 1,500 for each taxpayer in the country.

Perhaps understandably, Labour's leaders are extremely reluctant to admit the truth on tax. They think that if they simply repeat the mantra that they have kept their promise on tax, then it means they actually have. But the mask finally slipped at Prime Minister's Questions early last week when Mr Blair admitted that the tax burden was rising under Labour.

So I want Mr Brown to use his Budget speech finally to own up by how much taxes are going up under this government, and to do something to reverse the process.

Of course, we may well see some tax-cutting gimmicks next week. A 10p starting rate for income tax perhaps, or some minor tax breaks for small companies. But they will be accompanied by many tax increases elsewhere. And business will not be fooled by some small tax reliefs while the cost of doing business under Labour goes on rising through increased red tape and regulation. And people will not thank the Chancellor for a 10p rate if all that happens is that tax goes up elsewhere to pay for it.

Because that is what will happen. Take your pick from the pre-Budget favourites: a further reduction in Miras; more taxes on company cars; higher stamp duty; the taxation of child benefit; the abolition of the married couples' allowance; more tax on personal pensions.

The fact - as sure as night follows day - is that when Mr Brown gives with one hand, he takes away more with the other. I guarantee that the small print of the Budget will be riddled with stealth taxes which Labour hopes no one will notice.

I should make it clear that we welcome any genuine tax cut, though the 10p rate is only likely to apply to a very small slice of income and will do little to help the very poor, who don't earn enough to pay tax in the first place. But make no mistake, we will oppose the other side of Labour's bargain - the accompanying stealth tax increases which will more than swamp this small reduction.

Of course, I am keenly aware that whenever the Conservative Party talks about tax, our words risk being overshadowed by the fact that we lost the trust of the people on tax in the last Parliament. I agree that that was one of the reasons we were so soundly beaten at the last election. But we are learning from that shattering experience. People want politicians to be open about the overall tax burden. That's why we've said we will look at ways in which the amount of tax we all pay for goods and services - like petrol and alcohol - can be made more open and transparent. How many people know, for example, that after Mr Brown's Budget 84 per cent of the cost of a gallon of petrol will be tax?

It's also why we've said that people should receive a one-page statement each year clearly setting out how much income tax and national insurance they have paid that year and, crucially, what that money is spent on.

My final thought is on savings. After all, Labour's action on savings has perhaps been the most discreditable aspect of its performance. Not only has it piled a pounds 5bn-a-year tax on pension funds and scrapped dividend tax credits for the poor, it has also abolished the most popular and successful savings vehicles of all time - Tessas and PEPs - and replaced them with ISAs, which have been condemned by experts as a costly and complicated "dogs breakfast".

Not surprisingly, the savings ratio has fallen by a third under Labour, and the savings culture that had been so painstakingly built up in Britain is being rapidly eroded.

So next week I would like to see Gordon Brown abandon his dogma for once and set out policies to repair the damage of his first two years as Chancellor.

All Budgets are about tax. This Budget will be about more tax and stealth tax. It should be about less tax and honest tax.

n Francis Maude is Conservative Treasury spokesman.