Milburn plays down ‘tax bombshell’ report
Labour election chief Alan Milburn has downplayed suggestions taxes would inevitably rise if the Blair administration was re-elected for an historic third term of government.
The remarks came in the wake of an International Monetary Fund (IMF) forecast signalling imminent tax increases under Labour or spending cuts.
The IMF’s biannual World Economic Outlook predicted the British economy would grow by 2.6 per cent in 2005, down on the 3.5 per cent forecast by Chancellor Gordon Brown in his March Budget.
Tax would be the mechanism likely to make up the difference, it said.
The global financial watchdog warned Mr Brown would have to cut borrowing if he wished to meet his own “golden rule” on tax and spending in the course of an economic cycle.
“Fiscal policy has provided substantial stimulus in recent years, and steps are needed to accelerate the pace of fiscal consolidation – which is very modest in the recent budget – to meet the Government’s budgetary objectives over the course of the next economic cycle,” it said.
According to Conservative leader Michael Howard, the IMF had dropped a “tax bombshell” on Labour.
“The IMF have confirmed if Labour win the election they will have to put up taxes,” he said.
Shadow Chancellor Oliver Letwin added: “This is a timely reminder from the IMF that Mr Blair’s spending plans will mean tax rises after the election.”
But former Health Secretary Mr Milburn – once tipped as the successor to Mr Brown – said the IMF’s forecast was more a rule of thumb and had been “wrong” in the past.
“They have been wrong before and my guess is that they will be wrong again”, he said last night.
Mr Milburn said the tricky business of forecasting was best left to the Treasury and Mr Brown.
Unveiling Labour’s election manifesto on Wednesday, Mr Brown pledged Labour would resist raising the basic or top rate of income tax in the next parliament.
He also promised not to extend VAT to food, children’s clothes, books, newspapers and public transport fares.
But he refused to rule our further increases in National Insurance contributions.
