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Tories and Labour lay claims and counter-claims in battle to win voters with their tax plans
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The Independent Online
A barrage of political propaganda about Labour and Conservative tax plans left both parties deadlocked last night.

The day's election campaign began with Kenneth Clarke, Chancellor of the Exchequer, accusing Labour of planning the introduction of "sly" tax increases - and delivering a strong hint of tax cuts to come in his November Budget.

It ended with John Major publicly killing off any speculation of a snap election. In an interview to be broadcast today on Greater Manchester Radio, he said: "I am not going to call an election this year. The election will be next year."

With that in mind, Brian Mawhinney, the Conservative Party chairman, and Mr Clarke unveiled their latest campaign poster - showing the red eyes from their previous portrait of Tony Blair staring from an empty purse, with the headline, "New Labour, New Taxes".

Fleshing out the alleged threat, Mr Clarke said the withdrawal of child benefit from families with children going into sixth forms - "the teenage tax" - would cost them pounds 560 a year.

That was the equivalent of 5p on income tax, and Mr Clarke added: "The tartan tax would add another 3p to your tax bill on top of the new English taxes if you live in Scotland. That's around another pounds 340 a year for an average family living in Scotland.

"The private health tax would cost a pensioner pounds 180 a year - if you had taken out that insurance for your old age."

But Gordon Brown, the shadow Chancellor, replied that the same old Tories were telling the same old lies about Labour; his only commitment was to raise a one-off windfall tax on privatised utility profits. He also seized on an answer given by Mr Clarke to a question at a press conference about Conservative intentions to continue to shift the balance from direct to indirect taxation - the reason why value-added taxes have been increased while income-tax rates have fallen.

The Chancellor told The Independent: "In principle it is right to move, compared with the situation we used to have in this country, from direct to indirect taxation.

"It's an approach to taxation which is spreading through the Western world. The rationale behind it is that if you reduce marginal tax rates paid by people on their earnings, from their efforts, it has an incentive effect."

Mr Brown said later: "Mr Clarke cannot escape the fact that he is committed to extending VAT to food, VAT to books and newspapers, VAT to transport, VAT to children's clothes, and he cannot escape the fact that in a letter to a constituent, he said this was his eventual aim."

Mr Clarke dismissed that charge as "mythical extensions of VAT". However, having accused Labour of having a hidden tax agenda, he also said he had cut the tax burden: "We have been able to get the tax burden down in the last year of this parliament below what it was in the last year of the previous parliament."

The selection of years was careful. In the year before the 1992 election, the national tax burden, as a proportion of national income excluding the North Sea oil sector, was high at 36.75 per cent. It was cut back to 34.75 per cent in time for the April 1992 election - the same level left by Labour in 1978-79.

The overall tax burden this year is 36 per cent, and Treasury tables show the actual tax take from the average income family with two children has risen from 32.7 per cent in 1992-93 to 34.3 per cent this year, in direct and indirect taxes.

Mr Clarke countered, however, that real weekly take home pay, for the same family, had risen by pounds 700 a year since 1991-92 - the purse that Labour was intent on picking.

Labour's green rebel, page 8

Taxing high earners, page 17

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