Minister admits Labour will raise tax ... if it wins election

Labour may increase taxes again if it wins the next election, Treasury minister Liam Byrne signalled today.

The new Chief Secretary to the Treasury stressed that difficult decisions would need to be made on taxes and spending to get the public finances back in order.

"Alistair Darling has been really clear that there are going to be some pretty tough choices to be made," he said.

"There are going to be conditions of constraint and there are going to be difficult decisions on, for example, tax."

He emphasised that the Government had already decided to raise taxes on the rich.

"We think that the people who have done best over the last few years should pay a little bit extra tax," Mr Byrne added.

After accusing the Tories of unfunded tax promises, including on the inheritance levy, he added: "Unfortunately, if you are careless on tax, you end up cruel on spending."

He continued to defend the line that public spending would not be cut by Labour, though he all but admitted that capital spending would be reduced.

"Once you have built a school you have got a school," he said, adding that capital spending would move to one and a quarter per cent of GDP.

Shadow chief secretary to the Treasury Philip Hammond accused Labour of being disingenuous about public spending, stressing that departmental expenditure would have to be cut.

He admitted that "something had to give" to restore the public finances to health.

Mr Byrne's intervention draws clear battle lines between Labour and the Tories for the next election.

Labour will seek to portray Tory leader David Cameron as preparing to wield the axe and slash public spending while insisting that they will not be so brutal.

However, taxes could rise further if Gordon Brown wins another term for Labour.

The respected Institute for Fiscal Studies has warned of a £45billion black hole in the public finances that needs to be filled.