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Prime Minister Gordon Brown’s budget for the year leading up to the next election marks the end of the era known as “New Labour.”

By slapping a 50 percent tax on those earning 150,000 pounds a year ($217,000) or more and allowing debt to explode, Brown appealed to his party’s base and reversed policies dating from Tony Blair’s election in 1997 that rejected income-tax increases and encouraged wealth creation.

“The New Labour project is over,” said Ivor Gaber, professor of political campaigning and reporting at City University in London. “They tried to position New Labour as a friend to the City. Now that capitalism and the market are in turmoil, the whole narrative has collapsed.”

The blueprint presented yesterday in Parliament by Brown’s finance minister, Alistair Darling, delayed the costs of cutting an unprecedented deficit until after the next vote, which must be held by June 2010, and offered 5.2 billion pounds for items such as job training and help for pensioners amid the deepest recession since World War II.

Brown, who helped forge Blair’s program as Chancellor of the Exchequer for 10 years, has trailed in every opinion poll against the opposition Conservative Party since January 2008. Most recently, a BPIX poll on April 19 showed the gap at 19 percent.

“They have just panicked about the election, and that is what they are thinking about,” said Mark Wickham-Jones, professor of politics at Bristol University. “This looks like a short-term budget aimed at a spring 2010 election, gambling on a small recovery that will obfuscate the debt issue.”

Praise From Unions

Brown’s stalwart allies praised the budget, particularly the levies on those earning more than 150,000 pounds a year.

These are “some of the first steps in creating a fair tax system,” said Brendan Barber, general secretary of the Trades Union Congress. Britain’s unions are the biggest financial backers of the Labour Party. Compass, a Labour-supporting lobby that has campaigned for higher taxes on the rich, said the measures were “long overdue.”

When Labour was previously in power, in the late 1970s under James Callaghan, the top tax rate was 83 percent on earned income and 98 percent on unearned income. These rates were cut to 60 percent and 75 percent when Margaret Thatcher took office in 1979. Blair said his party, rebranded as New Labour, wouldn’t return to the past.

‘Over-Spent’

“They have done it again,” said Danny Gabay, a former Bank of England economist who now heads Fathom Financial Consulting in London. “Labour over-borrowed, over-spent and now the economy has turned, the cupboard is bare. The numbers are staggering. It’s a right mess.”

Brown’s budget also stripped away pension tax relief for people earning more than 150,000 pounds a year and delayed public spending cuts until after the election.

Planned austerity measures don’t bite until 2011, when tax increases, cuts in spending on wages for public workers and on infrastructure yield almost 27 billion pounds a year for the Treasury no fax payday loans.

Brown, 58, and Darling, 55, are seeking to tap into popular anger over the financial crisis, showing voters they are taking a stand against excessive pay, shifting some of the bill for bailing out banks onto the rich. In November, after the government took stakes in Royal Bank of Scotland Plc, HBOS Plc, and Lloyd’s TSB Group Plc, Darling announced the top tax rate would rise to 45 percent from 40 percent.

Extra Taxes

Under the latest increase, a person earning 160,000 a year will now pay an extra 3,600 pounds in taxes, while an income of 350,000 pounds will send the bill up by 22,600 pounds.

Darling rejected suggestions that he’s reverting to once- rejected policies.

“I don’t think New Labour has changed one bit in terms of how in a sense we want the country to do well, we want families to do well,” he told BBC radio’s Today program today. “I want a country of aspiration where people do well for themselves and their families.”

There was also politics behind Darling’s economic forecasts, analysts said. Darling yesterday said the economy will shrink by 3.5 percent this year and grow by 1.25 percent in 2010 and 3.5 percent in 2011.

About an hour after Darling’s announcement, the International Monetary Fund said the contraction would be 4.1 percent this year and 0.4 percent in 2010.

Had Darling, 55, adopted growth forecasts in line with the IMF’s, he would have faced greater pressure to break the government’s 2005 pledge not to increase taxes before the next election.

Record Debt

The deterioration in economic conditions has driven debt to its highest in history. Net debt will more than double to 1.37 trillion pounds in the fiscal year through March 2014 from 609 billion in the fiscal year ended this March.

Growth will probably fall short of Darling’s forecasts and public debt will reach 80 percent of GDP in two years, Willem Buiter, a former member of the Bank of England’s monetary policy committee, wrote in the Financial Times.

The cost of servicing the debt will increase to its highest level since the end of World War II, says Gabay of Fathom Financial Consulting. He calculates that by 2014, the government would be spending more on debt than it is spending now on education, close to 100 billion pounds from 43 billion in 2011 and 30 billion in 2009.

The U.K. faces an “extended period of high fiscal deficits” said Michael Saunders, chief European economist at Citigroup, unless a “serious fiscal tightening is introduced, but this will have to wait until after the next election and a probable new government.”

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