The Tax Debate: Dorrell says tax rise will be average of pounds 5.75 a week: Conservatives defend increases as necessary while Labour says pledges were broken

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THE average household would be pounds 5.75 a week worse off as a result of the Chancellor's tax increases imposed from midnight last night, Stephen Dorrell, Financial Secretary to the Treasury, said yesterday.

Pensioner households would be pounds 1 a week worse off, Mr Dorrell added. Defending the increases, he said: 'As the Prime Minister said, Conservatives only tax because we have to. Labour tax because they want to . . . We have made it very clear that our first priority must be to sort out the public finances.

'Government borrowing has to be paid for by taxation. But I am absolutely clear it is a great deal easier to explain that to Conservative voters than it would be explain why a Conservative government was continuing to plan on an unsustainable level of borrowing which would inevitably bring the kind of financial crisis which has become depressingly familiar over the years.'

Brushing aside Labour allegations that the tax increases showed the Tories had lied at the last election, Mr Dorrell made it clear that the Tories were prepared to fight the next election on tax.

Sir Norman Fowler, the Conservative Party chairman, confirmed the Tories would be seeking to repeat their successful attack on 'Labour's tax bombshell' by adding up Labour's tax and spending pledges. Sir Norman said the public recognised that economic recovery was taking place.

But the Tories were put on the defensive by the Labour tax campaign mounted yesterday by Gordon Brown, the shadow Chancellor, and Harriet Harman, the shadow Chief Secretary. They issued ready reckoners for voters in the local and European elections showing how their taxes have gone up as a result of the Budget.

Mr Brown said taxpayers were so shocked by their new tax codings last month that 5 million people had complained to the Inland Revenue. Typical taxpayers would be about pounds 500 a year, or pounds 10 a week worse off, and the tax rises would hit harder next year when widows on pounds 93 a week would be drawn into tax for the first time.

Ms Harman said that, from today, a married couple with two children on average earnings of about pounds 19,500 would be pounds 331.76 per year worse off as a result of combined tax increases and inflation.

A family on pounds 14,600 (75 per cent of average earnings) would see a cut of pounds 307.32 in their annual take- home pay, while a family earning pounds 29,200 faced a cut of pounds 578.24 and a family on pounds 38,900 (twice average earnings) would see a reduction of pounds 656.24 per year.

'The Conservatives told the British people that they would deliver rising living standards. Now they have betrayed this pledge because they have broken their promises on tax. The British people cannot trust the Tories on tax again,' she said.

----------------------------------------------------------------- What Labour says the combined increase in taxes will be ----------------------------------------------------------------- Gross Additional tax earnings pounds For single For married For married person working couple couple with pounds pounds 2 children under 11 pounds 5,200 158.08 111.28 104.00 10,400 307.32 302.64 358.80 15,600 469.04 521.04 526.24 20,800 630.24 674.96 693.68 26,000 728.00 837.72 797.68 28,600 918.32 918.84 1,035.32 -----------------------------------------------------------------