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Labour pledges not to raise NI

Labour has countered David Cameron's pledge not to increase VAT if the Conservatives win the general election with its own promise not to hike National Insurance.

Shadow chancellor Ed Balls said the promise would be included in the Labour manifesto for the May 7 poll - which would also include pledges not to raise the main rate of VAT or the basic or higher rates of income tax.

His announcement came less than two hours after the Prime Minister shocked the House of Commons by ruling out an increase in VAT for the full five years of a Tory government - something which Labour leader Ed Miliband insisted voters would not believe.

The tit-for-tat declarations will deprive an incoming administration of either colour of significant sources of revenue as they seek to balance the books following the general election.

But they also close down major vulnerabilities in the election campaign. Labour had only yesterday launched a poster warning voters of the VAT increase which would hit them if Tories won, while Mr Cameron used much of the last Prime Minister's Questions of this Parliament to issue warnings that Mr Miliband was secretly planning an increase in the "jobs tax" National Insurance.

Speaking to regional reporters at Westminster shortly after PMQs, Mr Balls said: "We will make it clear in the manifesto Labour will not be raising National Insurance. That will be a clear pledge from us."

And he told Sky News: "I said yesterday we will make our tax pledges in our manifesto, but I said yesterday that a Labour government will not raise the main rate of VAT, I said we will not increase the basic or higher rate of income tax and that Labour government will not raise National Insurance. That will be in our manifesto."

Mr Cameron's announcement - in response to a direct challenge from Mr Miliband - appeared to catch the Labour leader by surprise, coming just a day after Chancellor George Osborne had refused to give such an assurance to a Commons committee.

Instead it was Mr Cameron who was able to go on the offensive repeatedly pressing the Labour leader to rule out an increase in NI contributions, which he declined to do.

The exchanges were greeted with huge cheers by Tory MPs who were jubilant at the way the Labour leader had been so comprehensively wrong-footed.

The questioning opened with a challenge by Mr Miliband to rule out a rise in VAT to which, Mr Cameron said he would give a "straight answer", adding "the answer's yes".

Amid raucous scenes, the Labour leader retorted: "Nobody is going to believe him because of his extreme spending plans."

The Prime Minister however responded by repeatedly challenging Mr Miliband to rule out a rise in NI - currently paid at a rate of 12% on earnings over £7,956 a year and 2% on earnings over £41,860.

"This is Labour's jobs tax, this is their tax of choice, this is what they clobber working people, families, enterprises with," said Mr Cameron.

Mr Miliband sought to deflect the questions, highlighting what he said were the Conservatives' "broken promises" on the National Health Service, immigration and cutting the top rate of tax.

He insisted the Conservatives' spending figures did not add up and that the Office for Budget Responsibility had warned they would mean a "much sharper squeeze on real spending" than at any time over the last five years.

"Nobody believes his promises. He has had five years of failing working families and worse to come - more spending cuts, more tax cuts for the richest, more betrayal. This has been a Government of the few for the few," he said.

Mr Balls told Sky that a VAT hike and cuts to the NHS were "the only way the Tories will make their sums add up".

Mr Cameron had repeatedly said he had no plans to raise VAT before the 2010 election, only for Mr Osborne to increase it once the coalition was in place, said the shadow chancellor, adding: "As night follows day, Tories raise VAT".

Conservatives pointed to interviews given by Mr Miliband before he became Labour leader, in which he suggested that half of the burden of eliminating the UK's deficit should be borne by tax rise s.

With a £30 billion "consolidation" required to achieve this, Tory chairman Grant Shapps said this suggested that Labour would impose tax rises of £15 billion if it won power.

Mr Shapps said: "Labour are in chaos on tax. Ed Balls promises no National Insurance rise, but Ed Miliband refused to confirm this commitment in the House of Commons.

"Labour have committed to £15 billion of tax rises to deliver their deficit promise. Hard-working taxpayers have a right to know what they are.

"It's becoming clearer by the day that Ed Miliband has a secret plan for a new jobs tax and other higher taxes on hard-working people. Labour did it before and they'll do it again."

Business minister Matthew Hancock said he knew about the VAT announcement "earlier this week".

Pressed on BBC2's Newsnight whether he knew on Monday or Tuesday he said: "One of them, it all blends into one sometimes."

Asked about Mr Osborne's appearance at the Treasury Select Committee he said: "There was obviously a decision not to announce a new policy in that forum but instead to announce it at Prime Minister's Questions."

Shadow Treasury chief secretary Chris Leslie said Labour had ruled out an increase in NI a year ago but defended Mr Miliband's refusal to spell out the policy at the despatch box.

"We ruled it out a year ago," he said, adding that the decision was in response to pressure from some elements within Labour circles to hike it to fund the NHS.

Asked why Mr Miliband did not give a straight answer, Mr Leslie said: "This was questions to the Prime Minister, the Opposition hold the executive to account.

"Ed Miliband was very clear in saying that even if the Prime Minister says 'We are not going to do it', it's not believable."

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