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Chancellor Alistair Darling is due to announce plans to raise the top rate of income tax in his pre-Budget report.

He is expected to say a new 45% rate on earnings over £150,000 will be brought in if Labour win the next election.

Such a move would mark the end of New Labour's long-running pledge not to increase people's income tax rates.

The Tories said it was "cloud cuckoo land" to believe the tax increases needed in the future "could be dealt with simply by taxing the very rich".

'Symbolic significance'

Liberal Democrat treasury spokesman Vince Cable said: "By itself an increased tax rate on those earning over £150,000 would only raise negligible amounts of additional revenue."

WHAT IS EXPECTED
VAT: Temporary 2.5% cut
Income tax: 5p increase for top earners after next election
Vehicle excise duty: Postpone planned increase
10p tax rebate: Extend for another year
Corporation tax: Next rise postponed
Live text: Pre-Budget report



Mr Darling is expected to outline a series of immediate tax cuts in the pre-Budget report - at 1530 GMT - to boost the economy, which is widely believed to be in recession.

Setting out what amounts to a major change of direction in Labour's economic policy, Prime Minister Gordon Brown said the economic "dogma" that had dominated the past 20 years was no longer relevant because the biggest risk was now deflation rather than inflation.

And he said the government had to act quickly to pump money into the economy "at the start of a recession" to limit its impact.

"The best way for taxes to be lower in the long term is for us to ensure that the downturn is as limited in its length and scope as possible," Mr Brown told the CBI conference in central London.

WHAT WE DON'T KNOW YET
Debt: Could exceed £100bn annually
Taxes: Possible future rises for middle income earners
Public spending: Possible cuts after 2010/11
Growth: Forecast could be cut to 0.5% or even 0% next year



The tax changes in the pre-Budget report, which are expected to include a cut in VAT, will be paid for by an increase in government borrowing.

Mr Darling is also expected to outline how that money could be paid back in future years through a combination of slowing growth in government spending and tax increases.

BBC political editor Nick Robinson said the increase in the top rate of tax was of "huge symbolic significance", but stressed it would only raise a fraction of the sum needed to get the public finances back in order.


The fact that it would only be brought in if Labour won the next election, meant the party would be able to claim it had not broken its 2005 election promise not to increase income tax rates.

It is unclear how much a new tax rate could raise, but a Treasury answer to a Parliamentary question in 2006 suggested a 45% rate on people earning more than £150,000 would have raised £1.2bn.


The prime minister has so far refused to confirm a VAT cut from 17.5% to 15%, but did say there would be "substantial" measures to pump money into the economy.

Shadow chief secretary to the Treasury Philip Hammond said the Conservatives would control public spending rather than raising taxes.

"We would hope to avoid tax increases all together by slowing the rate of growth of public spending, getting the government to live within its means.

"And anybody who's suggesting that a tax increase can be dealt with simply by taxing the very rich and there will be no increases in taxes for ordinary families, is frankly living in cloud cuckoo land."



By itself an increased tax rate on those earning over £150,000 would only raise negligible amounts of additional revenue



Vince Cable
Liberal Democrats


Nick Robinson's blog

Lib Dem treasury spokesman Vince Cable said: "Now that the government has finally realised that the tax system is unfair and hits those on low incomes the hardest, ministers should focus their efforts on closing loop holes and removing tax advantages that the richest currently enjoy.

"The avoidan