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 &pound;14bn &ldquo;income tax bombshell&rdquo;.<br /><br />He released what he called &ldquo;secret&rdquo; figures from the treasury, showing a 3p in the pound income tax hike over future years.<br /><br />But MPs hit back, saying Osborne was misleading voters on the government&rsquo;s spending plans. <br /><br />The data shows the Treasury expects gross income tax receipts to increase sharply from &pound;144.7bn in 2010 to &pound;161.6bn in 2011/12.<br /><br />Each year &pound;2.5bn will be raised by tax increases which have already been announced, such as the 50p rate for higher earners. <br /><br />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.<br /><br />Osborne says &pound;14bn &ndash; equal to &pound;2,770 per family &ndash; of the tax intake for 2011/12 is not accounted for in government projections, even allowing for a return to growth. <br /><br />Chief secretary Liam Byrne said the &pound;14bn increase was based entirely on a predicted return to growth. <br /><br />But, Osborne asked &ldquo;if the increases are down to growth, why are other taxes such as VAT and National Insurance, projected to rise more slowly than <br />the income tax take?&rdquo;<br /><br />Treasury officials have said the situation is explained because income tax is hit by &ldquo;fiscal drag&rdquo;, where an increase in income pushes earnings into a higher tax band for VAT or National Insurance, meaning that workers will pay more tax.<br /><br />Other politicians also weighed in. Schools secretary Ed Balls said Osborne was &ldquo;making things up,&rdquo; while David Miliband, the foreign secretary, accused the opposition of &ldquo;playing juvenile politics&rdquo;.