Opposition parties reject tax increases

NORMAN Lamont was urged yesterday to resist Tory backbench pressure for tax increases as the Opposition parties published what they claimed were 'low- cost' alternative Budget proposals to tackle unemployment.

Labour said closing existing tax loopholes could release pounds 2bn over two years to create more jobs. And the Liberal Democrats said employers taking on people who had been jobless for more than six months should receive vouchers as a form of employment subsidy.

Gordon Brown, the shadow Chancellor, said there were six tax-avoiding loopholes currently costing the Exchequer pounds 1bn a year.

These included capital gains tax avoidance by companies anticipating large bills. The companies bought capital loss-making companies to cancel out the gains and avoid paying the tax, Mr Brown said. A similar scheme was openly operated to avoid advanced corporation tax.

Trust holders were paying only 35 per cent higher rate tax instead of the normal 40 per cent, he said.

Under the Liberal Democrats' 'working benefits' scheme, employers' vouchers for taking on jobless people would decrease in value in relation to the length of time they were employed.

Paddy Ashdown, the party leader, emphasised that the scheme was not a form of 'workfare', which insists that people work for their benefits. The proposal would allow the long-term unemployed to choose between remaining on the dole with just their benefits, or offering employers the chance to obtain a subsidy if they employed them. The voucher would be worth pounds 26 a week for an employer offering work to a person out of work for 12 months. It would be gradually withdrawn over time.

The impact on the public sector borrowing requirement, expected to each pounds 50bn by April next year, would be minimal or even positive as newly-employed people began to pay taxes.