Tories admit: you paid less tax under Labour

A TYPICAL family will pay higher rates of tax this year than under Labour's last Chancellor, Denis Healey, the Government admitted yesterday as a new bout of infighting broke out in the Conservative Party.

The embarrassing disclosure came in a Parliamentary reply from the Treasury as its Financial Secretary, Stephen Dorrell, led an ideological counter-attack against the right-wingers in the Cabinet.

The Shadow Chief Secretary to the Treasury, Harriet Harman, released the written answer which acknowledged for the first time that, from April, a typical family will pay proportionately more, in direct and indirect tax, than in 1979.

As a result of the Government's tax changes, a married couple with two children will pay 21.9 per cent of their earnings in tax, a rise of one per cent on the rate levied by Mr Healey in the last Labour administration. VAT on domestic fuel will drive up indirect tax from 11.3 per cent of family income in 1978-79 to 13 per cent.

In all, direct and indirect tax will account for 35 per cent of the typical family's income in the next financial year, compared with 32.2 per cent under Labour.

The disclosure does much to discredit the Tories' most potent electoral weapon - their pledge to be champions of low taxation - and follows claims by the Chancellor, Kenneth Clarke, that similar calculations made two weeks ago by Labour were 'piffle'. In an interview with Radio 4's Today programme Mr Dorrell admitted yesterday that April's tax increases will check the pace of economic recovery.

Ms Harman commented: 'These figures destroy the Conservatives' only political claim. Never again can they say they are the party of low taxation. They are now admitting that they have put up taxes on what people spend and on what people earn since they came to office in 1979.'

The Tories responded yesterday by arguing that wages and living standards had risen by 40 per cent since 1979 and that marginal tax rates have declined sharply since then. They concede, however, that in the forthcoming financial year, direct tax and National Insurance as a proportion of gross domestic product will overtake the 34.75 per cent of 1978-79, before peaking at 38.5 per cent in 1998-99. This, they argue, is the normal effect of a recession. But the Shadow Chancellor, Gordon Brown, said that 'no Labour government has reached that figure'.

The public acknowledgment that tax rates are higher than under Labour will dismay the Tory right whose agenda was openly attacked by Mr Dorrell in the first signs of a centre-left fightback against right-wingers accused of hijacking 'back to basics'.

Speaking in Cambridge, Mr Dorrell, one of the most senior ministers outside the Cabinet, offered a thinly-veiled rebuttal of a provocative speech made by Michael Portillo, Chief Secretary to the Treasury, a week ago.

Mr Dorrell argued that 'respect for inherited institutions' was not the same as 'as a commitment to preserve them in aspic'. In a speech said to have been approved by Downing Street he added: 'A society that does not change will ossify.' Mr Portillo, a departmental colleague of Mr Dorrell, had argued that the erosion of respect for institutions would lead to social disintegration.

Mr Dorrell said that Conservatives rejected 'the exaggerated histrionics of flag- waving nationalists' and praised entry into the European 'Union' - a term avoided by many Tories - as 'one of the major achievements of Ted Heath's generation'. In a rebuke to Thatcherites, Mr Dorrell rejected the idea 'that freedom is best guaranteed by an atomised society which emphasises the individual perspective', and he defended aspects of the 1960s that have been vilified by many Tories.

Peter Temple-Morris, MP for Leominster and a leading figure on the Conservative centre-left, said: 'I thoroughly enjoyed the Sixties myself. I have no regrets about the past. I also think that for the broad mass of the people this is a more pleasant country to live in now than it was in the days to which some people hark back. I think it is highly likely that the centre-left of the party will become more vocal.'

William Powell, Conservative MP for Corby, argued: 'I do think the Prime Minister is very fed up with the way in which headlines are being grabbed by people whom he regards as comparatively minor members of the Cabinet.'

Dorrell speech, page 2

(Photographs omitted)