Brown forced to defend record as thinktank finds £40bn tax rise

Brown forced to defend record as thinktank finds £40bn tax rise

In its annual health check of the nation's budget, the Institute for Fiscal Studies said the tax burden under Labour had increased by £40bn. It accused the chancellor of manipulating the economic cycle to meet his own fiscal rules.

The thinktank's Green Budget was immediately seized on by the opposition. George Osborne, the shadow chancellor, said: "The independent and respected Institute for Fiscal Studies has confirmed that the average family is £1,300 worse off thanks to Gordon Brown's 10 budgets so far. What's more, taxes are predicted to soar still further. Yet our prisons are full and the NHS is in financial crisis. People have the right to ask: what has Gordon Brown done with their money?"

In response, the Treasury said the thinktank had got its figures wrong. "These figures are incorrect and it is ridiculous to suggest that families are worse off under this government. The facts of the matter are that as a result of personal tax and benefit measures introduced since 1997, households are on average £950 a year better off in real terms, and tax credits mean that 3 million families pay no net tax at all. The overall tax burden now and over the forecast period is well below.....continued below

Advertisement starts

Advertisement ends

The thinktank warned that the public could expect a period of austerity over the coming years as Mr Brown sought to bring down public borrowing from its total of £37bn in 2005/06. It said the Treasury was projecting £10bn of tax increases while cutting spending by the same amount.Predicting a tough spending review this summer, the thinktank said Mr Brown might have to choose between hitting the government's target on child poverty or financing the NHS. The Green Budget said reducing the number of children living below the EU's po verty threshold by 50% from its 2000 level before 2010 would cost £4bn. "Even if spending in areas such as defence and environmental protection were frozen in real terms this could only be found by allocating the NHS less than the minimum recommended by the Wanless review and/or cutting education spending as a share of national income."

The IFS predicted Mr Brown would be forced to put off increases in tax credits that were meant to tackle child poverty to concentrate on health and education. Even so, schools and hospitals would receive smaller increases in resources than they have enjoyed during the rapid expansion of the public sector since the turn of the millennium.

The Treasury said: "We do not recognise the IFS projections about spending cuts. The comprehensive spending review will set out the government's plan for spending, which will build on the record investments already made in public services."

Mr Brown announced two rules for the public sector in Labour's first term. He said that over an economic cycle the government should only borrow to invest, with spending on goods and services matched by tax receipts. He also said the public debt should stay below 40% of GDP.