Obsolete

The United Nations warned Gordon Brown last night that he will have to levy taxes on the better-off in Labour's third term if the government is to meet its ambitious goal of halving child poverty by 2010.

In its flagship annual study charting progress in tackling poverty, the UN highlights Britain as a country where inequality has put a brake on development, and says there would need to be a complete reversal of the pro-rich bias of the 1980s to eradicate the legacy of Margaret Thatcher.

Its human development report (HDR) praises Labour for its efforts to tackle child poverty since 1997, but says a cash-strapped Mr Brown needs to go further in his coming budgets and contemplate politically sensitive tax rises to maintain the progress made in the past eight years.

"If the next 10 years did for the poor what the 1980s did for the rich, that would bring the UK within touching distance of the child poverty goals," the UN says.

In the UK the incomes of the richest 10% rose by 3.7% a year on average from 1979 to 1990 compared with a 0.4% average increase for the poorest 10%. Taxes on top earners were cut from 83p to 60p in the first Conservative budget in 1979 and from 60p to 40p in 1988.

If the incomes of the poor rose by 3.7% and those of the rich rose by 0.4% until 2010, child poverty would be cut from 23% to 17%, the UN says.

It says Labour's untrumpeted tax and benefit changes since 1997 have resulted in the incomes of the poorest fifth of the population rising by 20%. However, the report says the government needs to do more to load the tax and benefits system in favour of the less well-off, make it easier for poor parents to find work, and make "fundamental changes to the underlying distribution of earnings and income".

The Conservative party today held out the possibility of an east European style flat tax, with the shadow chancellor, George Osborne, commissioning an investigation of the system pioneered in some former Soviet states.

Mr Osborne today called for "a flatter and simpler tax economy" and announced he would hire a senior business figure to report back next year on whether a completely flat tax regime would be viable in the UK.

The introduction of such a system, which scraps progressively higher tax bands in favour of a uniform (and usually low) percentage, would be controversial, with opponents claiming it is little more than a tax cut for the rich. Flat taxes have so far only been introduced in developing economies seeking to attract foreign investors.