PARLIAMENT: FISCAL POLICY - Labour has kept its vows on tax, says Chancellor

LABOUR WOULD not be breaking its promises on tax if the overall tax burden rose during the lifetime of this Parliament, Gordon Brown said last night.

Under a barrage of hostile questions from Tory MP, the Chancellor came close to admitting that the tax burden would be higher at the end of Labour's term in office than the level it inherited from John Major's government.

"We made no promises in relation to the tax burden," Mr Brown said during a lengthy grilling by the Treasury Select Committee. "We have kept all the promises we made at the general election."

He listed Labour's manifesto commitments as not increasing the basic rate or higher rate of income tax and introducing a 10p starting rate. He argued that the Government had gone further by cutting the basic rate to 22p from next April.

Mr Brown insisted that the Government's taxation of the average family would be at its lowest level since 1972 by the end of this Parliament.

He said the share of national wealth taken in tax would be 37.4 per cent last year, 37 per cent in the current financial year and 36.8 per cent next year. But he repeatedly refused to confirm to Tory members of the committee that Labour had inherited a figure of 36 per cent when it came to power in 1997.

Mr Brown's stonewalling was seen by Tory MPs as his clearest hint to date that taxes would rise under Labour. The issue is bound to loom large at the next election, with the Tories attacking the "stealth taxes" which have pushed up the overall burden of taxation. But Labour will argue that taxes would have risen even more under the Tories' spending plans.

David Ruffley, a Tory committee member and a former Treasury adviser, said Mr Brown was a "student chancellor" while Sir Michael Spicer, another Tory MP, told him: "You are the only person in the world now who thinks taxes are on their way down."

Mr Brown disclosed that the Treasury's spending plans were based on excise duties on fuel and tobacco rising in line with inflation. Although this would not prevent him raising them by more than the retail price index, his comments suggested that John Prescott may not necessarily win huge amounts for public transport projects from inflation-plus rises in petrol duty. In his pre-Budget report last month, Mr Brown scrapped the policy of raising fuel prices by 6 per cent on top of inflation but the money raised from any above-inflation increases would be ploughed into public transport.

Meanwhile, the Chancellor did not close the door entirely to cabinet ministers demanding a hike in government spending during the across-the- board review to be completed by next summer. He said only that there would be a strong presumption that the spending plans for the 2001-2 financial year would remain at the level agreed during the Government's previous three-year programme.

Mr Brown denied persistent press speculation that he was cooling on early British entry into the single currency. He insisted the Government would be in a position to make a decision early in the next Parliament, a policy he announced in October 1997.