Mandelson (pictured) is the first senior minister to admit to the potential need for further tax increases beyond what has already been announced, as early as 2011.
His comments came in a debate with Conservative Shadow Business secretary Ken Clarke yesterday and followed news that Government borrowing is to fall below the £178bn forecast.
He said: “There will come a time, and the new public spending review begins in March 2011 and we will prepare for that in a way that will enable us to judge much more carefully, and much better, what we have to do, what the economic circumstances require, both in raising taxation, should that be further necessary in addition to what we have already announced, or cutting public expenditure in ways that will be dictated by the size of the deficit at that time.”
The Conservatives seized upon Mandelson’s comments as evidence that “Labour is in chaos on tax”.
Shadow Chief Secretary to the Treasury Philip Hammond says: “People will be asking who speaks for the Government on tax, Liam Byrne, Peter Mandelson or Alistair Darling.