Fuses blow over Tory tax `bombshell'

Labour and the Conservatives were locked in combat last night after the Tories dropped their latest tax "bombshell".

The Treasury Chief Secretary, William Waldegrave, said the shadow Chancellor, Gordon Brown, was planning 89 tax-and-spend policies that would add a further pounds 30bn to public spending - costing the average family an around pounds 1,200 a year.

Mr Brown opened up a Labour counter-barrage, saying: "Having lied about their own tax plans, and raised taxes 22 times against all promises, they are now lying about Labour's tax and spending plans."

The exercise left a significant number of casualties including collateral, friendly-fire injuries suffered by Sir Robin Butler, the Cabinet Secretary and Head of the home civil service, who was dragged into the centre of a crude political dogfight. In February, Sir Robin instructed Whitehall officials to obey ministerial instructions on the costing of Opposition policies.

The second victim was Mr Waldegrave, who faced a revival of the highly damaging complaints made against him in the Scott report on arms to Iraq, which accused him of using "sophistry", and making statements that were "apt to mislead", "not remotely arguable", "incapable of being sustained by serious argument" and just plain "untrue".

Labour was also shown to have made statements that might have been taken as pledges, but which Mr Brown yesterday flatly repudiated. He made it plain, for example that, Labour's commitment to a publicly owned railway system was not a priority. "We have made no financial commitment to that," Mr Brown said. "What we have said is that British Rail will be re-created as a public-led body. But we are making no commitment to buying shares or anything else."

The day's battle began with Mr Waldegrave issuing a dossier listing 89 alleged Labour commitments. "Each is backed by firm pledges from Labour spokesmen or in Labour Party documents," Mr Waldegrave said. "The total cost of these commitments comes to pounds 30bn."

Labour replied in the afternoon with a dossier of its own, repudiating the basis of the Tory allegations - attempting to defuse the "bombshell" that worked so effectively in the last general election.

Rebuttal followed rebuttal as the day wore on, with the Conservatives issuing a further dossier at 7pm, headed, Labour's pounds 30 billion Cover-up: Labour's Rebuttal Rebutted. Mr Waldegrave said: "At the end of a day of hot air from a clearly rattled Labour Party, round one has been won by the Conservative Party." That result was less clear-cut to those who had tried to get Mr Waldegrave to answer some basic questions at his morning press conference. He had said that the pounds 30bn costing was "equivalent to Labour putting the basic rate of income tax back up from 24p to 33p, the level under the last Labour government, and the higher rate up from 40p to 70p. That would cost the average family around pounds 1,200 a year."

However, when Mr Waldegrave was asked to say how much Conservative tax increases had cost the average family since the last election, he became coy."We had to put up taxes during the recession in order to pay for spending at the present level."

Neither Mr Waldegrave, nor Brian Mawhinney, the Conservative Party chairman, would repeat the commitment given during the last election, that there would be no further extension of value-added tax - a 1992 pledge broken with VAT on domestic fuel and power.

Opening a pre-emptive strike against the Conservatives, Mr Brown said: "The Tories have raised taxes 22 times since the last election, including the rise in National Insurance, cutting the married couple's, cutting mortgage interest tax relief, and the unfairest tax of all, VAT on fuel. If the Chancellor cuts the basic rate of tax by 2p in the Budget, the typical family will still be paying almost pounds 500 more in tax per year."

A day of rebuttal: Some of the 89 claims made by the Tories and how Labour answered them

The Government says Labour would

Introduce national minimum wage at a cost of pounds 3,700m Source: "There should be and will be . . . a statutory minimum wage" (Tony Blair 1996 Labour conference).

Costing assumption: impact on public sector pay bill of minimum wage set at half the median average male wage, with a domino effect on differentials.

Labour response: The minimum wage level will be set "according to the economic circumstances of the time ... Far from costing the public money, the minimum wage will end the scandal of unscrupulous employers being subsidised at the expense of the taxpayer ... [at present] costing pounds 2.4bn."

Increase spending on house-building at a cost of pounds 2,600m

Source: "We need to . . . allow local councils to invest capital receipts - on a phased basis - to build and renovate homes." (Draft manifesto, New Labour, New Life for Britain, 1996) Costing assumption: Total amount of capital receipts set aside since 1990 in England estimated at pounds 7.3bn. If released over five years at pounds 1.5bn a year, could be topped up with annual receipts.

Labour response: "All of Labour's plans for council house spending will come from the phased release of existing receipts currently held by local authorities."

Reduce social security benefit tapers

at a cost of pounds 2,000m

Source: "We will: combine our long-term objective of a lower rate of income tax . . . with reductions in the rate of benefit withdrawal." (New Labour, New Life). Costing assumption: A reduction of the maximum marginal rate of benefit withdrawal, for every extra pounds 1 earned, from 97 per cent to 84 per cent.

Labour response: Initial outlay would come from anti-fraud measures, but "we expect that within three years of implementation, a benefit-to-work strategy ... will start to reap substantial savings for the taxpayer."

Introduce sabbaticals for teachers

at a cost of pounds 1,300m

Source: "We should explore arrangements to provide sabbatical terms to help people recharge batteries and further develop their skills." (Blair, January 1996).

Costing assumption: Teachers with 10 years' service taking four months off; those with 15 years' service taking full year. Cost of pounds 4.25bn spread over five years.

Labour response: Costs would have to be funded from existing resources; lower early retirement costs and industry sponsorships. "There would be no new money."

End council tax capping

at a cost of pounds 1,200m

Source: "Crude council tax capping should go, though as any government must, we will retain reserve powers in extreme cases." (New Labour, New Life).

Costing assumption: Local authority spending increase of extra one percentage point a year, equivalent to 1.9 per point increase in council tax.

Labour response: "We will retain reserve powers."

Guarantee a minimum income for pensioners

at a cost of pounds 1,100m

Source: "Labour will [get] better automatic help to the poorest pensioners." (New Labour, New Life).

Costing assumption: A minimum guaranteed income of pounds 80 a week would cost pounds 4,300m.

Labour response: "We believe that the pension entitlement could achieve significant savings in the administration of the benefits system."

Restore public ownership of the railways

at a cost of pounds 960m

Source: "We will give Britain a publicly owned, publicly accountable BR." (Blair, 1996 Labour conference).

Costing assumption: A complete buy-back of Railtrack, with cost spread over five years.

Labour response: Party committed to publicly owned and publicly accountable railways system, "as economic circumstances", and transport priorities, allow.