Election `97: Battle hots up over tax rates

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The Conservatives, Labour and the Liberal Democrats were reduced to a form of political mud-wrestling over their respective tax plans yesterday.

The day's accusations began with the Conservatives, whose press conference slogan of the day was: "Tory tax cuts in April. Labour tax rises in July."

But while Mr Major accused Labour of harbouring secret tax plans, there was again no answer to the question - for the fourth day running - as to whether another Conservative government would further extend or increase VAT.

Kenneth Clarke, the Chancellor of the Exchequer, preferred to concentrate his attack on Labour's so-called black hole - the gap between its spending commitments and its funding, partly exposed by the money that might have been raised from privatisation projects in the second year of a Labour government.

That second-year gap currently runs to pounds 1.5bn, but Alistair Darling, Labour's Treasury spokesman, promptly retaliated, asking the Chancellor: "Which revenue-raising privatisations has he committed himself to, apart from air traffic control, to raise pounds 1.5bn in the second year of government?"

Mr Clarke said he had "a pretty good idea" what other privatisations could be launched to raise the rest of the missing pounds 1.5bn, but he was not going to identify them.

Attention then switched to the Liberal Democrat manifesto, which included a paragraph, saying: "We will take nearly 500,000 low-earners out of income tax altogether by raising tax thresholds. This will provide lower taxes and new incentives to work, while cutting the benefits bill and reducing tax for 99.5 per cent of all income taxpayers."

Challenged by The Independent about that statement when the party was pledged to increase the rate by a penny, to 24p in the pound, Paddy Ashdown suggested that all taxpayers would benefit from the lifting of the tax threshold by pounds 200 - before they paid the extra penny.

The calculations were complex, but he later told the BBC radio's World at One programme: "The average taxpayer is paying more tax."

Under the Liberal Democrat plans, 140,000 people with taxable income of more than pounds 100,000 would pay a top tax-rate of 50p, raising pounds 1.4bn. Of that, pounds 1.2bn would be used to lift the tax threshold by pounds 200, taking 470,000 people out of tax completely. Of the remaining 25million taxpayers, the estimated 12.5 million earning up to about pounds 12,945 would be better off, or no worse off, and the other 12.5 million would make a contribution towards extra finance for education.

Mr Ashdown said those on average earnings of pounds 19,000 would pay an extra pounds 1.23 a week, while those on pounds 38,000 would pay an extra pounds 2.70.