THE main parties were locked in a new battle last night on tax and spending after shadow chancellor Michael Portillo claimed Labour could put up national insurance contributions for almost four million middle income earners.

Mr Portillo claimed raising the ceiling for employees' contributions had emerged as the "prime candidate" for Labour to raise more revenue, after Chancellor Gordon Brown refused to rule out an increase. The Tories say Labour will need to find £10bn in the second half of the next Parliament to fund their spending commitments.

Labour, however, returned fire, again pressing the Tories over shadow chief Treasury secretary Oliver Letwin's claim that a Conservative government could cut tax and spending by as much as £20bn.

Liberal Democrat treasury spokesman Matthew Taylor also attacked the Tory plans, saying: "Everybody knows you can't get a tax cut without cutting services. That means cuts in hospitals, schools, pensions or policing."

On a day of relatively muted campaigning, the parties also clashed over plans by Home Secretary Jack Straw to prevent paedophiles "grooming" youngsters over the Internet.

Mr Straw unveiled proposals for the courts to issue paedophile prevention orders, banning named individuals from contacting children over the worldwide web.

However, shadow home secretary Ann Widdecombe dismissed the plan, saying that paedophiles would not be deterred by a "piece of paper".

Mr Brown, meanwhile, sought to pre-empt a letter, expected to be published in today's Daily Telegraph, from about 40 business leaders, criticising Labour's record of economic management. He claimed that Labour was "increasingly seen as the party of business, of enterprise and of commerce in this country".

The Telegraph letter is seen as the reply to last week's letter in The Times from 58 business people strongly endorsing Labour.

Tory leader William Hague, meanwhile, was trying to rally his activists.

"We can win. We are certainly winning the campaign. Millions of people in this country are undecided about how to vote," he said.

"It is one of the strong messages coming back that millions of people are fed up with Labour, feel let down by Labour."

However a NOP poll for The Sunday Times, taken in the immediate aftermath of Deputy Prime Minister John Prescott punching an egg-throwing demonstrator, showed Labour increasing its lead to 19 points.

Tony Blair, meanwhile, was taking a day off, relaxing at Chequers where the family were celebrating the first birthday of his son, Leo.

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