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Leaders face tax policy pressure

24/08/2008

Debate about how to respond to Britain's economic woes is intensifying in both the Labour and Conservative parties.

Both Gordon Brown and David Cameron are finding themselves under pressure today to calls from their parties' left and right wings for changes in taxation policy.

A YouGov poll carried out for left-wing group Compass and the Observer newspaper finds two-thirds strongly agree or agree with a windfall tax on energy companies, a move the prime minister has so far resisted making.

Such a move, mirroring that made by Tony Blair in 1997, would assist families struggling to make ends meet because of high energy prices around the world. Gas and electricity bills have shot up in recent months, reflecting the profits of those charging them.

"We believe that the moment is right for the government to levy a sensible one off windfall tax to guarantee social and environmental justice both now and in the future," a statement on Compass' website said.

"Used in the right way this could benefit the UK economy as a whole - just as the New Deal in 1997 created new jobs for the long term unemployed, such an investment could see the creation of hundreds of thousands of new jobs in renewable energy production, insulation, building renovation and other sectors."

The Conservative party faces its own internal pressures. John Redwood and Lord Forsyth of Drumlean have come out in favour of more radical public expenditure cuts as their proposed means of reducing the impact of the current austere economic climate.

Lord Forsyth told the Sunday Telegraph newspaper a clear link existed between levels of taxation and room for economic growth.

"If you want to get further growth then the state has got to take less from people in tax. As you reduce the levels of taxation you will get growth," he said.

Mr Redwood warned the "road to recovery" is going to see conditions get worse before they improve.

"There are areas where you could stop spending on unnecessary programmes which will start to relieve pressure. We can cut back on things," he said.

Current opinion polls could push the prime minister to more radical measures than those considered by Mr Cameron.

A ComRes poll published today in the Independent puts the Conservatives on 39 per cent, an enormous 19 points clear of Labour on 20 per cent.