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The Liberal Democrats today sought to present a clear choice to voters as they unveiled plans for a new 50% top rate of income tax and the abolition of council tax.
Launching his party's alternative budget just weeks ahead of an expected general election in May, Charles Kennedy, the Liberal Democrat leader, also pledged to raise the threshold for stamp duty on housing purchases from ?60,000 to ?150,000 in order to exempt around 400,000 first-time buyers from the levy.
Seeking to claim the moral high ground on tax, Mr Kennedy said his party's tax policy was based on the principle that the burden of taxation should not fall disproportionately on the poor and vulnerable.
"We have a reputation for being straightforward on tax. That will not change," he said. "But the difference between the parties on tax take is minimal. The real issue will be one of principle and of priority."
The Lib Dems are alone in proposing higher income tax rates. While the idea has struck a chord with some Labour backbenchers, the prime minister, Tony Blair, has been adamantly opposed to such a policy on the grounds that it sends a wrong signal on wealth creation.
Interviewed on BBC Radio 4's Woman's Hour programme this morning, Mr Blair attacked the Lib Dem plans for a 50p top rate of tax. "The Lib Dem policy is rather dangerous - you catch a lot of people other than the super rich," he said.
Vince Cable, the Lib Dem Treasury spokesman, said the changes were intended to reverse a situation in which the poorest 20% currently pay a higher percentage of their income in tax than the top 20%.
The 50% top rate on earnings of more than ?100,000 would pay for the abolition of university tuition and top-up fees, the introduction of free personal care for the elderly and reductions in local taxes, the Lib Dems said. Mr Cable said switching from council tax to local income tax would save the average family ?450 a year and would benefit pensioners and people on low incomes, while high earners would pay more.
The Lib Dem alternative budget also proposes savings of ?5bn a year - including the abolition of the Department of Trade and Industry, ID cards and the Child Trust Fund - in order to fund a ?100 boost to weekly pensions for over-75s, 10,000 more police, smaller infant class sizes and guaranteed maternity pay of ?170 a week.
"I believe we can have both a liberal and a fair economy, better public services and tax cuts for the average family, strong growth, with tough financial discipline. Our policies are fully costed, and will promote economic freedom and social justice," Mr Cable said.
Seeking to spike the Lib Dems' guns, Labour yesterday warned that a couple on average earnings would be ?260 a year poorer under a local income tax.
Today, the chancellor, Gordon Brown, said his March 16 budget would focus on skills and training to deal with the economic challenge from Asia.
In a speech at the opening of the Wolverhampton Learning Quarter, a training centre for teenagers and adults, Mr Brown said: "The higher ambition for the Britain of the future is that every young person has training throughout their teenage years, that every adult without skills has the guarantee of training for basic qualifications in work, [and that] every town and city has a one-stop learning centre."
Mr Brown said his trip to China last week had opened his eyes to the challenge that emerging economies posed to Britain. "We cannot ignore or succumb to the China and Asian challenge, but must seize it," he added.
The chancellor's speech came amid reports of discontent within Labour ranks over the party's efforts to galvanise supporters ahead of the election. There has been disquiet over the effectiveness of the early stages of the campaign, which is being coordinated by Alan Milburn instead of Mr Brown.
Mr Brown controlled election strategy in Labour's landslide victories in 1997 and 2001, and many party members complain that he has been sidelined by Mr Milburn - a claim the latter has dismissed as "utter and complete nonsense".
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