Gordon Brown defies unions' 'squeeze the rich' call

Gordon Brown will risk losing the support of union chiefs by snubbing their demands for huge tax increases for the rich.

The Prime Minister is under pressure to raise the top tax band to 50p in the £1 for those earning more than £100,000 a year.

Unions also want an increase of the threshold at which National Insurance starts from £3,500 to £5,000 and a cut for people earning up to £40,000 a year.

But Mr Brown will stand firm this weekend as he is desperate to avoid a return to the class-ridden policies of the 1980s.

A return to flying pickets and calls to make it easier for workers to strike through online and phone ballots will also be snubbed by the Government.

The three biggest unions – Unite, the GMB and Unison – have called for the tax rises for the rich in amendments to draft policy statements. If their demands are not met, some unions have threatened to withdraw funding by disaffiliating from the Labour Party.

But the Prime Minister has made taxation a ‘red line’ issue for the crucial talks at Labour’s National Policy Forum and will refuse any discussion on the subject.

‘Anything to do with tax and spending, particularly increasing levels of taxation, is just not going to happen,’ a senior Government source has said.

However, the issue is likely to resurface at the party conference in Manchester in September. In all, the unions, which account for 90 per cent of Labour funding, have set out a wish list of more than 100 demands.

Ministers and officials have been locked in discussions in order to whittle them down to a ‘manageable level’.

Other key demands include extending the minimum wage to 18 to 21-year-olds and apprentices, free school meals for all primary children and a new agreement on public sector pay – in return for continuing to bankroll Labour.

But the senior party officials believe that caving in will make the party ‘unelectable’.

With Labour’s finances in crisis, the party relies on regular injections of cash from the unions to meet its daily running costs and service its £18million debts.

Ministers are hoping to confine concessions to areas that are less politically sensitive, such as travel concessions for disabled people and minor extensions of family friendly policies.

Mr Brown is already preparing to bow to calls for more flexible arrangements to give new fathers more time off work.

Unions have demanded the sacking of Business Secretary John Hutton because some of their leaders cannot stand to be ‘in the same room as him’.

Unions are furious with Mr Hutton after he said in May that sweeping new regulations are no longer seen by Labour as the best way to improve standards.

But if Gordon Brown does sack him, he will be accused of caving in to union demands. The Confederation of British Industry has made it clear that it is keen to see Mr Hutton stay in his post.