BRITAIN: Tax rises to boost spending on health, education and key public services are expected to form the core of Labour's future economic policy when the British Chancellor, Mr Gordon Brown, presents his budget this week.
Pitching Mr Brown's sixth budget as a "fundamental choice" between sacrificing public services in favour of Conservative-backed tax cuts, the Prime Minister, Mr Tony Blair, yesterday gave another strong indication that taxes were set to rise to pay for improvements in health care and other public services.
In recent months both Mr Blair and Mr Brown have tested public opinion on raising taxes by linking increased public spending to public service reform.
Expressing confidence that the voters were now prepared to pay more for world-class public services, Mr Blair wrote in The Observer: "There is no reason why we should not be able to match or beat European levels of performance, but only if we insist that more money levers in reform.The budget will crystallise for the country a fundamental choice in values, not just policies. Do we take the benefits of economic stability and sacrifice public services in favour of short-term tax cuts, as the Conservatives would, or do we invest in the future as we intend to?"
But as speculation mounted that Mr Brown would announce phased tax increases of up to 3p in the pound - representing an extra £7 billion for public services and tax credits for the poor - through higher National Insurance contributions and higher VAT, the Conservatives warned they would oppose tax rises if they were not accompanied by reform.
The Conservatives favour raising the revenue for increased spending on the NHS through social insurance systems, not tax rises, a scheme the party leader, Mr Iain Duncan Smith, will develop in a pamphlet entitled "Alternative Prescriptions" published later today.
The shadow chancellor, Mr Michael Howard, told BBC R4: "If all we get is more talk, more taxes, no change and no difference, yes we will vote against those extra taxes because pouring more money into a bottomless pit of unreformed public services will not deliver the change in the quality of life which the people of Britain deserve."
At the same time, the former Northern Ireland secretary, Dr Mo Mowlam, launched a bitter attack on her former Cabinet colleagues, accusing the Labour leadership of mounting a "vicious, violent, appalling" smear campaign against her.
Reported extracts from a forthcoming Channel Four documentary on the political career of the former Redcar MP, who had suffered a brain tumour, revealed that she will claim the media was briefed that her illness left her intellectually unable to do her job.
"My health was used against me all the way through the whispering campaign, that I thought was damn well disgusting," claims Dr Mowlam, who has been an outspoken critic of New Labour.