Bruce throws down tax gauntlet to Blair

PATRICIA WYNN DAVIES

Political Correspondent

The Liberal Democrats threw down the gauntlet to Tony Blair yesterday as Malcolm Bruce, the economic spokesman, challenged Labour to vote against "short-term" tax cuts in the November Budget. Pledging his own party to oppose "cynical short-term tax bribes", Mr Bruce said long-term investment must come first, and lower interest rates should come before higher borrowing. "That's my message to Ken Clarke [the Chancellor] today."

Addressing the conference the day after Mr Blair delivered a pledge of greater co-operation between the two parties both before and after the next election, Mr Bruce challenged the Labour leader: "Tony, if you really want to co-operate, join us in the lobbies and show you are prepared to vote with us for our children's future."

The Liberal Democrats are pledged to a 1p increase in income tax if that is needed to pay for pounds 2bn improvements in education, and to a 50 per cent top rate of tax for people earning more than pounds 100,000.

Mr Bruce, who is less enamoured than some with the idea of closer links with Labour, said afterwards that the Liberal Democrats were committed to voting against a deliberate government decision to reduce the net tax take, for example by cutting the standard rate.

The picture could, however, be complicated if the Chancellor combined a cut with raised tax thresholds or other measures to help the low paid, which the Liberal Democrats support.

Citing justifications for the stand on tax-cutting, Mr Bruce announced a petition to make the Budget an "education Budget test for the Tories", while attacking the proposed savaging of spending on overseas aid.

But the most rousing applause came when Mr Bruce reaffirmed his party's pledge to buy back a 51 per cent majority share in Railtrack if it is sold off before the election - a further area over which Labour has made no specific commitment and in which the Liberal Democrats are attempting to wrong-foot Mr Blair.

Dramatically revising a previous estimate of the cost of reversing the sell-off from pounds 5bn down to just over pounds 1bn, Paul Tyler, the transport spokesman, later told the conference that Mr Blair's "hot air" was proving dangerous. "By refusing to be specific, by failing to distinguish between Railtrack and individual support companies or service provision, the Labour leadership is risking the loss of the whole rail system. We know that his transport spokespersons take differing views,"he said.

The economic policy paper, Investment, Partnership, Sustainability, passed by the conference yesterday constitutes a definitive statement of Liberal Democrat economic policy for the next election and forms one of the three priority areas marked out in the party's Liberal Democrat Guarantee.

The economic pledges include ensuring that over the course of the economic cycle, borrowing is only used to finance capital expenditures, the establishment of an operationally independent but democratically accountable U K reserve bank charged with keeping inflation under 3 per cent, investment allowances to small and medium-sized businesses of up to pounds 200,000 a year, statutory regulation of financial services, and a massive switch of taxation towards pollution and away from jobs.

On the issue of long-term unemployment, the conference backed a proposal for a Benefit Transfer Programme to convert welfare benefits paid to the long-term unemployed to vouchers payable to employers who took them on.