Treasury's tax bombshell: pay less under Labour

Document shatters myth of sky-high Labour taxes

The tax burden is not only heavier than it was when Labour left office in 1979, but also exceeds the figure for 1974, when Harold Wilson led a minority Labour government, according to a Treasury brief on the Budget.

A remarkably partisan document, the brief says: "[The] UK burden of tax and public spending [is] lower than almost any other EU country, including Germany France and Italy."

But a table shows that on the basis of provisional OECD data for 1995, while the domestic tax burden - at 35.2 per cent of national income - is indeed lower than that of Germany (39.1 per cent), France (44.5 per cent), and Italy (41.8 per cent), it is still higher than it was 20 years ago.

According to the OECD, the UK tax burden was 34.9 per cent in 1974, compared with 32.6 per cent in 1979, 34.1 per cent in 1994, and 35.2 per cent last year.

The Treasury's own figures show the tax burden increasing inexorably between 1996-97 and 2001-02

The Budget brief has previously been classed as a confidential document, but has been "unclassified" and made available to The Independent following a formal request for disclosure under the terms of the Government's code of open government - and a successful appeal.

But the document that has been released this year is notable for the omission of some of the more controversial data that could be used as ammunition against the Government. One source said it had been "filleted". The brief once included, for example, calculations on the tax burden for the average family - including indirect taxes. This year's brief is restricted to "tax as a percentage of earnings for a family on average earnings ... Income tax and national insurance contributions."

The Treasury is currently sitting on a parliamentary question about the overall tax burden, including indirect taxes, put by opposition Treasury spokesman Alistair Darling before the Budget.

Summing up the Government's tax record, the brief said: "Highest marginal rate is now 40 per cent compared with 98 per cent before 1978-79. Since 1978-79 marginal tax rates on earnings have fallen but marginal tax rates on spending have risen.

"Real take-home pay for a family on average earnings should be pounds 370 higher next year than this, after tax, inflation and earnings growth; over pounds 1,100 higher than in 1991-92. This growth in living standards has been widely spread."

Detailed tables show that since 1978-79, when Labour was last in office, there has been a "swing" of 5 percentage points from direct tax on incomes to indirect tax on spending.

The Treasury brief also contains a table from a social security analysis, "Households Below Average Income", showing that while overall average disposable income has increased by 40 per cent in real terms, after housing costs, between 1979 and 1993-94, it has fallen by 13 per cent for the bottom 10 per cent, according to "uncertain" Family Expenditure Survey figures.

Donald Macintyre, page 15