Spain’s Socialist government is considering an increase in capital-gains tax as a result of the economic crisis but will not raise tax rates on earned income, José Luis Rodríguez Zapatero, prime minister, said on Monday.

Mr Zapatero and his cabinet have overseen a yawning budget deficit expected to reach 10 per cent of gross domestic product this year. They are now struggling to prepare a budget for 2010 in the face of falling revenues, higher state spending and resistance from the smaller political parties they need to pass laws in parliament.