By Keith Weir
LONDON, March 29 (Reuters) - The opposition Conservatives said on Monday they would exempt most Britons from a planned payroll tax rise, helping to fund the measure through efficiency savings worth an initial 6 billion pounds ($9 billion).
In a tax pledge aimed at wooing voters ahead of an election expected on May 6, the Conservatives said they would cut public spending in 2010-11 by renegotiating deals with suppliers, keeping tighter control on recruitment and other measures.
The Conservatives, who vow to cut the deficit harder and faster than ruling Labour although they have tempered their rhetoric, said those savings would also allow them to cut government borrowing in the 2010-11 financial year.
They said the measures would lead to further savings in future years and give them headroom to exempt seven out of 10 workers from a planned 1 percentage point rise in National Insurance due to take effect in April 2011.
Labour, in power since 1997 but trailing narrowly in opinion polls, argues premature spending cuts could stifle a fragile recovery from the deepest recession since World War Two.
The rise in payroll tax for workers and employers is a key part of Labour's pledge to halve the record budget deficit within four years but it would only start cutting back next year.
'Identifying the 6 billion pounds of savings in 2010 gives me the confidence that ... we will be able to act more quickly on the deficit and at the same time avoid the most damaging part of (Prime Minister) Gordon Brown's national insurance tax rise,' opposition finance spokesman George Osborne told reporters.
The cost of exempting less well-paid workers from the National Insurance rise would be 5.6 billion pounds, he said, citing estimates from the independent Institute for Fiscal Studies.
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The IFS think-tank put out its own statement saying that the Conservatives would need to raise other taxes or make additional cuts if they were to go faster than Labour on deficit reduction.
'Using the bulk of these spending cuts to finance the NI cut means that they are not available to contribute to the task of reducing government borrowing that the Conservatives have set such store by,' the IFS said.
'Reducing the deficit more quickly than the government plans to will therefore require even greater cuts to public services spending, or greater reliance on welfare cuts or tax increases that might be as economically costly as the NI increases they are seeking to mitigate,' it said.
Finance minister Alistair Darling said Osborne's figures did not add up.
'What is incredible are the claims that George Osborne is now making promising to spend billions of pounds in the next parliament when he hasn't got a single penny in the bank to do it,' Darling told Sky News.
Ratings agency Standard & Poor's said on Monday that the outlook on Britain's triple-A credit rating remained negative due to worries over the debt burden.
However, business lobby group the British Chambers of Commerce called the curbing of the tax hike 'an important step in the right direction'.
'To secure the recovery, we must completely eliminate this damaging tax on jobs,' BCC Director General David Frost said in a statement.
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LONDON, March 29 (Reuters) - The opposition Conservatives said on Monday they would exempt most Britons from a planned payroll tax rise, helping to fund the measure through efficiency savings worth an initial 6 billion pounds ($9 billion).
In a tax pledge aimed at wooing voters ahead of an election expected on May 6, the Conservatives said they would cut public spending in 2010-11 by renegotiating deals with suppliers, keeping tighter control on recruitment and other measures.
The Conservatives, who vow to cut the deficit harder and faster than ruling Labour although they have tempered their rhetoric, said those savings would also allow them to cut government borrowing in the 2010-11 financial year.
They said the measures would lead to further savings in future years and give them headroom to exempt seven out of 10 workers from a planned 1 percentage point rise in National Insurance due to take effect in April 2011.
Labour, in power since 1997 but trailing narrowly in opinion polls, argues premature spending cuts could stifle a fragile recovery from the deepest recession since World War Two.
The rise in payroll tax for workers and employers is a key part of Labour's pledge to halve the record budget deficit within four years but it would only start cutting back next year.
'Identifying the 6 billion pounds of savings in 2010 gives me the confidence that ... we will be able to act more quickly on the deficit and at the same time avoid the most damaging part of (Prime Minister) Gordon Brown's national insurance tax rise,' opposition finance spokesman George Osborne told reporters.
The cost of exempting less well-paid workers from the National Insurance rise would be 5.6 billion pounds, he said, citing estimates from the independent Institute for Fiscal Studies.
MORE CUTS SEEN LIKELY
The IFS think-tank put out its own statement saying that the Conservatives would need to raise other taxes or make additional cuts if they were to go faster than Labour on deficit reduction.
'Using the bulk of these spending cuts to finance the NI cut means that they are not available to contribute to the task of reducing government borrowing that the Conservatives have set such store by,' the IFS said.
'Reducing the deficit more quickly than the government plans to will therefore require even greater cuts to public services spending, or greater reliance on welfare cuts or tax increases that might be as economically costly as the NI increases they are seeking to mitigate,' it said.
Finance minister Alistair Darling said Osborne's figures did not add up.
'What is incredible are the claims that George Osborne is now making promising to spend billions of pounds in the next parliament when he hasn't got a single penny in the bank to do it,' Darling told Sky News.
Ratings agency Standard & Poor's said on Monday that the outlook on Britain's triple-A credit rating remained negative due to worries over the debt burden.
However, business lobby group the British Chambers of Commerce called the curbing of the tax hike 'an important step in the right direction'.
'To secure the recovery, we must completely eliminate this damaging tax on jobs,' BCC Director General David Frost said in a statement.
- To see the latest Reuters stories on the UK election, click on
- To see the latest stories about the UK, click on or visit http://link.reuters.com/quq44j for multimedia coverage
- See us online at
http://uk.reuters.com/news/globalcoverage/politics
- Follow us on Twitter https://twitter.com/reuters_co_uk
($1=.6690 Pound) Keywords: BRITAIN ELECTION/TAX XX:SU:REUTERS#SN:nLDE62S0VE#XX:521650.0#HS:RAMSTXT_9088_2010-3-29_133736_1_87#DU:lanreunxd1+lanreznxd1+rekwire+reawire+rexwire+bsu8rtr+lanrexnxd1#XN:##XP:tfukfipdista.datastream.com ~ (keith.weir@thomsonreuters.com, 00 44 20 7542 7947; Reuters Messaging: keith.weir.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.