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Top earners face income tax rise Top earners face income tax rise
(20 minutes later)
Chancellor Alistair Darling is to announce in his pre-Budget report he intends to raise the top rate of income tax in the future, the BBC learns.Chancellor Alistair Darling is to announce in his pre-Budget report he intends to raise the top rate of income tax in the future, the BBC learns.
BBC political editor Nick Robinson said the move would break a Labour pledge held ever since Tony Blair came to power in the 1997 election.BBC political editor Nick Robinson said the move would break a Labour pledge held ever since Tony Blair came to power in the 1997 election.
He said sources suggested that after the next election a new 45p rate could apply to incomes above £150,000 a year.He said sources suggested that after the next election a new 45p rate could apply to incomes above £150,000 a year.
The government has not confirmed any of the details.The government has not confirmed any of the details.
'Symbolic significance''Symbolic significance'
Mr Robinson said the pledge not to raise either the basic or top rate of tax was repeated in the party's 2005 manifesto.Mr Robinson said the pledge not to raise either the basic or top rate of tax was repeated in the party's 2005 manifesto.
He said he understood a top rate increase would be delayed until after the next election so the party can claim it has not broken its 2005 promise and that it would have a new electoral mandate. He said he understood a top rate increase would be delayed until after the next election, possibly in 2010.
If implemented, the measure would be of "huge symbolic significance", he said. This would allow Labour, if it wins the election, to claim it has not broken its 2005 promise and it had a new electoral mandate, he said.
"However it would only raise a fraction of the sum needed to get the public finances back in order so other significant tax raising measures will have to be announced tomorrow for introduction in future years," Mr Robinson added. He described a rise in higher earners' income tax as of "huge symbolic significance", but stressed it would only raise a fraction of the sum needed to get the public finances back in order.
It is unclear how much a new tax rate could raise, but a Treasury answer to a Parliamentary question in 2006 suggested a 45% rate on people earning above £150,000 would have raised £1.2bn.
There has been much speculation about the specific details of Mr Darling's pre-Budget report, to be unveiled on Monday.There has been much speculation about the specific details of Mr Darling's pre-Budget report, to be unveiled on Monday.
However, it is expected he will announce short-term tax breaks to stimulate the economy including a temporary cut in VAT from 17.5% to 15%.However, it is expected he will announce short-term tax breaks to stimulate the economy including a temporary cut in VAT from 17.5% to 15%.
The government's strategy risks hobbling the economy even more and scaring off potential investors when we need them most Matthew Elliott, Taxpayers' Alliance
The prime minister has so far refused to confirm a VAT cut, but did say there would be "substantial" measures to pump money into the economy.The prime minister has so far refused to confirm a VAT cut, but did say there would be "substantial" measures to pump money into the economy.
Tory leader David Cameron has warned the government's plans will lead to a future "tax bombshell".Tory leader David Cameron has warned the government's plans will lead to a future "tax bombshell".
Experts say the government will have to increase borrowing to record levels of £100bn or more, which the country will have to pay back later in higher taxes - and there is no guarantee tax cuts will get consumers spending again.
News of an income tax rise is expected to be met with mixed reactions.
The Taxpayers' Alliance chief executive Matthew Elliott described the move as "a totally backward step".
"To recover from the recession, Britain needs to be a low tax, competitive economy, not one that punishes success," he said.
"The government's strategy risks hobbling the economy even more and scaring off potential investors when we need them most."