Labour may raise taxes to meet targets after next election

Tony Blair and Gordon Brown insisted yesterday that the Government's spending plans were affordable but refused to rule out tax rises if Labour won a third term.

Tony Blair and Gordon Brown insisted yesterday that the Government's spending plans were affordable but refused to rule out tax rises if Labour won a third term.

The Chancellor shrugged off City forecasts that the figures in Thursday's pre-Budget report would leave him with a £10bn "black hole" that would force him to increases taxes after the general election, expected in May.

"No politician should make the mistake that John Major made in 1992 of saying no matter what the circumstances are they can make all sorts of guarantees on every thing," he said.

"That is not what politicians should do, it would not be responsible to do." In a round of media interviews, Mr Brown said that critics who doubted his forecast that the economy would grow by between 3 and 3.5 per cent next year would be proved wrong.

"We will meet our targets. Last year people said it was impossible and I said there would be growth of 3 per cent to 3.5 per cent and it came in absolutely right, right in the middle at 3.25 per cent," he said.

At the 1997 election, Labour promised "no tax rises". It has cut the basic rate of income tax from 23p to 22p in the pound, but the Tories claim there have been 66 tax rises and will campaign on "Labour's third-term tax increases" at the election.

Oliver Letwin, the Shadow Chancellor, said: "I can't find a single economic forecaster from the IMF to the Institute of Fiscal Studies who believes anything other than the Chancellor has got a black hole in his finances. In order to deal with that he will have to raise taxes."

Asked if he could guarantee that Mr Brown's strategy would not require tax rises, Mr Blair told BBC Scotland: "The guarantee I can give is the same as the Chancellor has given, which is that any of the spending pledges we have ... are fully funded within our figures." In a speech in Edinburgh, the Prime Minister said: "The public finances are in good shape and there is no reason to be deflected from the successful course the Chancellor has set to meet our fiscal rules."

The current budget was in surplus over the economic cycle and Treasury growth forecasts were "entirely in line with our existing policies to meet our fiscal rules", he said. But Mr Blair said that stability was "only a foundation" towards building a society which offered "genuine opportunity".

In education, he argued, "equality of opportunity" was not enough in a society where large numbers were not motivated to take the opportunities on offer. He appeared to blame parents who did not teach their children to be ambitious. He said: "What is holding so many young people back is not lack of ability, but lack of aspiration - and a view of education which is negative. There remains an immense challenge to transform the culture of aspirations ... not least among parents who do not realise the importance to their children of achievement and qualifications."