Treasury admits that tax rises are higher than 'Labour's bombshell'

THE GOVERNMENT was forced on to the defensive last night after a triumphant Labour Party extracted a Treasury admission that the typical family would pay an extra pounds 1,160 a year in tax from April 1995.

A claim by the Tories that Labour would increase a family's tax bill by pounds 1,000 was widely credited with helping them to win the 1992 general election. A high-profile poster campaign drew attention to 'Labour's tax bombshell'.

The new figure is the latest to emerge from parliamentary questions on tax by Harriet Harman, the shadow Chief Secretary. In what Labour immediately called the Tories' own 'tax bombshell', Stephen Dorrell, the Financial Secretary, gave a written answer showing that a family with two children and one breadwinner on average earnings would pay pounds 22.32 a week more in April 1995 than now.

With Labour preparing to exploit the figures in forthcoming council and European elections and three by-elections, Gordon Brown, shadow Chancellor, said the 'two-year tax ratchet reveals the truth of a bigger tax demand from the Tories than ever they were able to claim with lies at the last election about Labour'.

The figures, which presume that average earnings will rise to pounds 20,243 in 1995- 96, show that the total direct and indirect tax paid by the typical family would rise from pounds 118.36 a week now to pounds 140.68 from April 1995 as a result of the tax rises imposed by the two Budgets last year. Total taxes paid by a family earning about pounds 30,000 would rise from pounds 190 to pounds 226.

After heated exchanges between John Smith, the Labour leader, and the Prime Minister in the Commons, Mr Brown added that with 'everyone earning under pounds 64,000 paying more tax under the Tories and only those earning above pounds 64,000 paying less', the divide was now between 'fair taxes under Labour and unfair taxes under the Tories'.

Mr Dorrell said last night that the figures were based on the hypothetical assumption of Ms Harman's question that average earnings would rise by as much as pounds 30 a week. If earnings did not rise by as much as that the tax increases would be less. He added that by again raising the issue of tax, Labour was 'playing a dangerous game in front of their own goal'.

He said the electorate understood that tax and spending were the same issue and that anyone who though Labour would be better at reducing either was 'not thinking straight'. The figures showed that tax as a proportion of national income would still be lower than in 1979 - 16.2 per cent compared with 18.4.

--------------------------------------------------------- THE TORY TAX BILL --------------------------------------------------------- Weekly income tax and National Insurance contributions paid on annual income --------------------------------------------------------- 1993-94 1995-96 pounds 20,000 pounds 73 pounds 87 pounds 30,000 pounds 123 pounds 148 pounds 40,000 pounds 193 pounds 226 pounds 60,000 pounds 337 pounds 381 ---------------------------------------------------------