Miliband ally tells the rich: you should pay higher taxes

Ed Miliband wants an equal split between higher taxes and spending cuts

One of Ed Miliband's closest allies has backed a tax increase for higher earners as Labour prepares to reveal new details about his plan to deal with Britain's budget deficit.

Peter Hain, who was part of Mr Miliband's leadership campaign team, said an increase in tax on the wealthy would "square the circle", allowing Labour to avoid the Coalition Government's controversial cut to child benefit. His intervention comes as the new shadow Chancellor, Alan Johnson, prepares to make his first major speech in the role on Monday. Mr Johnson has also agreed to television interviews over the weekend.

Tax plans were discussed at a meeting of the Shadow Cabinet on Thursday, with Mr Miliband known to favour an equal split between higher taxes and spending cuts to ease the £155bn deficit. Alistair Darling, the previous chancellor, had wanted 66 per cent of his party's deficit reduction plan to be made up of spending cuts, with 34 per cent coming from tax increases.

Mr Hain said placing a greater burden of tax on high earners would allow Labour to protect those on middle incomes from losing universal benefits.

The Coalition has already announced its intention to withdraw child benefit from those earning around £44,000 or more. "Universality is non-negotiable," Mr Hain said. "If you start driving a coach and horses through universality you're effectively saying to middle Britain, 'you've got no stake in the welfare state.' I think the Tories and Liberals are making a very big mistake on child benefit. There's an answer to people on higher incomes and that's they pay higher taxes. And that is the answer to squaring that circle."

One option for Mr Miliband would be lowering the 50p tax band, which currently applies to anyone earning more than £150,000 a year. However, others close to the Labour leader favour raising revenue through a hefty increase in the levy on banks.

Since his election, Mr Miliband has said he plans to do "more from taxation" than Mr Darling had intended. During the leadership campaign, he also said Mr Darling had drawn up the "wrong ratio" of tax rises and spending cuts. "I think we should look to see where we could get more tax revenue from," he said.