Official figures reveal rise in tax under Labour

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The Independent Online
GORDON BROWN'S attempts to portray Labour as a tax-cutting government were undermined last night by new figures suggesting the tax burden has risen since the last general election.

The Tory Opposition seized on the statistics, produced by officials in the House of Commons Library, showing the overall tax burden had grown in every three-month period since the election in May 1997.

Although the Chancellor dismissed the figures, the Tories sensed blood in their long fight with Labour over "stealth taxes", because the sums were based on calculations from the Government's Office for National Statistics.

The figures show that total taxes and social security contributions were 35.6 per cent of Gross Domestic Product (GDP) when Labour came to power. By the second quarter of this year, the figure had risen to 37.7 per cent.

The Tories said the key difference between these statistics and the Government's lower figures was the treatment of the pounds 5bn-a-year Working Families Tax Credit, which boosts the income of low-pay families.

Mr Brown has decided to treat the credit as negative taxation - which, critics say, artificially depresses the ratio of taxes to GDP.

Francis Maude, the shadow chancellor, said: "It is time that Gordon Brown came clean on tax.

"He should admit, once and for all, that taxes are rising massively by stealth and that Labour's pre-election promise not to `increase tax at all' wasn't worth the paper it was written on."

Labour hit back, insisting that even on the Tory figures, the burden of taxation would be lower under Labour than under the spending plans it inherited from the Tories.

A Labour source said: "This is Tory hypocrisy from a party which broke their promises on tax by introducing 22 new taxes."

Yesterday Tony Blair claimed his administration had been the first in history to combine successfully "compassion with prosperity".

In a speech in London, the Prime Minister said: "The economy is what matters. And slowly but surely the position of the two parties is being reversed - spun through 180 degrees, on the way to the attainment of a huge prize, namely the establishment of New Labour as the party of economic competence."

Mr Blair said that for much of this century Labour had been seen as the party that cared, "but when it came to your money or the economy it was seen as a risk".

For New Labour, economic competence was the "key strategic objective", Mr Blair said. "It is the foundation on which all else we do is built; if people don't trust us with their money, they won't trust us with anything."

The Government's finances are in even better state than indicated by last week's Pre-Budget Report, thanks mainly to rising tax revenues, according to official figures yesterday showing it repaid pounds 6.6bn of its borrowing last month.

Corporation taxes, always high in October, reached a record pounds 11.3bn.

Taxes on companies, including the windfall tax, were increased in Gordon Brown's first two Budgets.

The Treasury said the bigger-than-expected monthly surplus was due to changing patterns of tax payments by companies, and could not be extrapolated for the full year. "The past is no guide to the future," a spokesman said.

City analysts believe the Chancellor's forecasts for government borrowing are on the cautious side, and will leave scope for tax cuts before the next election.

Business Outlook, Page 23


THE OVERALL tax burden is calculated by dividing national income (Gross Domestic Product) by the amount raised from taxes and social security contributions.

This provides the tax burden as a percentage of the GDP.

According to the figures which were published by the Conservative Party yesterday, the burden has risen since the last general election:

1997 (2nd quarter) 35.6%

1997 (4th quarter) 35.9%

1998 (2nd quarter) 36.8%

1998 (4th quarter) 37.4%

1999 (2nd quarter) 37.7%