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Top earners face income tax rise Top earners face income tax rise
(20 minutes later)
Chancellor Alistair Darling is due to announce plans to raise the top rate of income tax in his pre-Budget report.Chancellor Alistair Darling is due to announce plans to raise the top rate of income tax in his pre-Budget report.
He is expected to say a new 45% rate on earnings over £150,000 will be brought in if Labour win the next election.He is expected to say a new 45% rate on earnings over £150,000 will be brought in if Labour win the next election.
Such a move would mark the end of New Labour's long-running pledge not to increase people's income tax rates.Such a move would mark the end of New Labour's long-running pledge not to increase people's income tax rates.
The Tories said it was "cloud cuckoo land" to believe the tax increases needed in the future "could be dealt with simply by taxing the very rich".The Tories said it was "cloud cuckoo land" to believe the tax increases needed in the future "could be dealt with simply by taxing the very rich".
Liberal Democrat treasury spokesman Vince Cable said: "By itself an increased tax rate on those earning over £150,000 would only raise negligible amounts of additional revenue."
'Symbolic significance''Symbolic significance'
Liberal Democrat treasury spokesman Vince Cable said: "By itself an increased tax rate on those earning over £150,000 would only raise negligible amounts of additional revenue."
Mr Darling is expected to outline a series of immediate tax cuts in the pre-Budget report - at 1530 GMT - to boost the economy, which is widely believed to be in recession.Mr Darling is expected to outline a series of immediate tax cuts in the pre-Budget report - at 1530 GMT - to boost the economy, which is widely believed to be in recession.
WHAT IS EXPECTED VAT: Temporary 2.5% cutIncome tax: 5p increase for top earners after next electionVehicle excise duty: Postpone planned increase10p tax rebate: Extend for another yearCorporation tax: Next rise postponed Live text: Pre-Budget report
These changes, which are expected to include a cut in VAT, will be paid for by an increase in government borrowing.These changes, which are expected to include a cut in VAT, will be paid for by an increase in government borrowing.
WHAT IS EXPECTED VAT: Temporary 2.5% cutIncome tax: 5p increase for top earners after next electionVehicle excise duty: Postpone planned increase10p tax rebate: Extend for another yearCorporation tax: Next rise postponed
Mr Darling is also expected to outline how that money could be paid back in future years through a combination of slowing growth in government spending and tax increases.Mr Darling is also expected to outline how that money could be paid back in future years through a combination of slowing growth in government spending and tax increases.
BBC political editor Nick Robinson said the increase in the top rate of tax was of "huge symbolic significance", but stressed it would only raise a fraction of the sum needed to get the public finances back in order.BBC political editor Nick Robinson said the increase in the top rate of tax was of "huge symbolic significance", but stressed it would only raise a fraction of the sum needed to get the public finances back in order.
WHAT WE DON'T KNOW YET Debt: Could exceed £100bn annuallyTaxes: Possible future rises for middle income earnersPublic spending: Possible cuts after 2010/11Growth: Forecast could be cut to 0.5% or even 0% next year
The fact that it would only be brought in if Labour won the next election, meant the party would be able to claim it had not broken its 2005 election promise not to increase income tax rates.The fact that it would only be brought in if Labour won the next election, meant the party would be able to claim it had not broken its 2005 election promise not to increase income tax rates.
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 more than £150,000 would have raised £1.2bn.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 more than £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 afternoon.There has been much speculation about the specific details of Mr Darling's pre-Budget report, to be unveiled on Monday afternoon.
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 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.
By itself an increased tax rate on those earning over £150,000 would only raise negligible amounts of additional revenue Vince Cable Liberal Democrats Nick Robinson's blog
Shadow chief secretary to the Treasury Philip Hammond refused to comment on the merits of raising taxes for higher earners but said the Conservatives would control public spending rather than raising taxes.Shadow chief secretary to the Treasury Philip Hammond refused to comment on the merits of raising taxes for higher earners but said the Conservatives would control public spending rather than raising taxes.
"We would hope to avoid tax increases all together by slowing the rate of growth of public spending, getting the government to live within its means."We would hope to avoid tax increases all together by slowing the rate of growth of public spending, getting the government to live within its means.
"And anybody who's suggesting that a tax increase can be dealt with simply by taxing the very rich and there will be no increases in taxes for ordinary families, is frankly living in cloud cuckoo land.""And anybody who's suggesting that a tax increase can be dealt with simply by taxing the very rich and there will be no increases in taxes for ordinary families, is frankly living in cloud cuckoo land."
By itself an increased tax rate on those earning over £150,000 would only raise negligible amounts of additional revenue Vince Cable Liberal Democrats Nick Robinson's blog
Lib Dem treasury spokesman Vince Cable said: "Now that the government has finally realised that the tax system is unfair and hits those on low incomes the hardest, ministers should focus their efforts on closing loop holes and removing tax advantages that the richest currently enjoy.Lib Dem treasury spokesman Vince Cable said: "Now that the government has finally realised that the tax system is unfair and hits those on low incomes the hardest, ministers should focus their efforts on closing loop holes and removing tax advantages that the richest currently enjoy.
"The avoidance opportunities and reliefs become even more important if a higher tax rate is introduced."The avoidance opportunities and reliefs become even more important if a higher tax rate is introduced.
"By itself an increased tax rate on those earning over £150,000 would only raise negligible amounts of additional revenue.""By itself an increased tax rate on those earning over £150,000 would only raise negligible amounts of additional revenue."