'Tax rise for high earners' planned
Alistair Darling is expected to announce a higher rate of income tax for top earners as he sets out how he will claw back a multi-billion boost to the shrinking economy.
The Chancellor was said to be unveiling the plan for a 45% top rate on people earning at least £150,000 a year in his Pre-Budget Report
But the new tax band would not be introduced until after the next general election, which must be called by May 2010 at the latest.
It is thought to be among a series of deferred tax increases designed to bring down borrowing incurred now to fight the recession.
The PBR is expected to see Value Added Tax cut from 17.5% to 15% as part of a £15 to £20 billion "fiscal stimulus" to encourage spending and spur economic growth.
The plans will send borrowing soaring above £100bn, leading to Conservative accusations that Labour is storing up a "tax bombshell" in a reprise of the Tories' 1992 election campaign.
The Treasury refused to comment on the apparent leak of the 45% tax rate to several newspapers, describing it as "speculation".
But ministers repeatedly stressed that Mr Darling would set out in the PBR how he intended to get the public finances on a more stable footing later on."
A new top rate of tax would create a widening divide between Labour and the Tories on fiscal policy. Conservative leader David Cameron announced last week he would no longer match Government spending plans from 2010/11 and has set his face against any unfunded spending increases.
Labour has been committed since 1997 to no increases in income tax, including for the duration of this Parliament. The deferral of any increases in income tax until after the next election will mean that they will not be introduced unless they are endorsed by voters.
