Osborne hits out at Labour over tax row
SHADOW chancellor George Osborne was last night at the centre of a row with Labour and the Treasury after he accused the party of hiding a £14bn “income tax bombshell”.
He released what he called “secret” figures from the treasury, showing a 3p in the pound income tax hike over future years.
But MPs hit back, saying Osborne was misleading voters on the government’s spending plans.
The data shows the Treasury expects gross income tax receipts to increase sharply from £144.7bn in 2010 to £161.6bn in 2011/12.
Each year £2.5bn will be raised by tax increases which have already been announced, such as the 50p rate for higher earners.
Revenues from income tax will go up as the economy starts to grow, but the row focuses on the extent to which that growth will go towards higher tax revenues.
Osborne says £14bn – equal to £2,770 per family – of the tax intake for 2011/12 is not accounted for in government projections, even allowing for a return to growth.
Chief secretary Liam Byrne said the £14bn increase was based entirely on a predicted return to growth.
But, Osborne asked “if the increases are down to growth, why are other taxes such as VAT and National Insurance, projected to rise more slowly than
the income tax take?”
Treasury officials have said the situation is explained because income tax is hit by “fiscal drag”, where an increase in income pushes earnings into a higher tax band for VAT or National Insurance, meaning that workers will pay more tax.
Other politicians also weighed in. Schools secretary Ed Balls said Osborne was “making things up,” while David Miliband, the foreign secretary, accused the opposition of “playing juvenile politics”.