Parties exchange tax hike claims

David Cameron has accused Labour of planning to bring almost one million more people into the higher 40p rate of income tax as the two major parties exchanged blows over claims of secret plans to hike taxes.

Mr Cameron said taxpayers would pay "a heavy price" for a Labour government because Ed Miliband's party would not match Conservative pledges to raise the threshold for the 40p rate to £50,000 and the 20p band to £12,500.

He also said Ed Miliband would abolish the married couples' allowance which came into effect today and repeated claims - denied by Labour - that they would hike national insurance if they won power.

Shadow chancellor Ed Balls makes a speech in Leeds to coincide with the new tax year while on the General Election campaign trail

Shadow chancellor Ed Balls makes a speech in Leeds to coincide with the new tax year while on the General Election campaign trail

But shadow chancellor Ed Balls said a Conservative government would mean "millions paying more while millionaires pay less" as he accused Tories of planning to raise VAT while cutting the top rate of income tax for earnings over £150,000 from 45p to 40p.

The row over tax blew up on what Mr Cameron described as "money-back Monday" when a set of tax cuts came into effect with the start of the financial year, including the married couples' allowance and the increase to £10,600 in the threshold below which no income tax is payable.

Speaking in Bristol, Mr Cameron restated his pledge to avoid rises in VAT, income tax or national insurance following the May 7 election, adding: "We're clear - we need more tax cuts for hard-working people ... Labour opposed our tax cuts this parliament, they oppose our plans for tax cuts in the next.

"The only cut they want to make is to your pay."

He repeated Conservative claims - dismissed as unfounded by independent economists at the Institute for Fiscal Studies - that Labour would increase taxes on working families by an average £3,028 and said that Labour would also drag more people into the 40p rate of income tax.

"This isn't one or two people being hit - it's nearly a million more people paying the 40% tax under Labour," he said.

"Britain would pay a heavy price for a Labour government, and it would start with you and your pay packet."

But Labour insisted that voters have lost an average £1,100 each due to tax and benefit changes under the coalition while millionaires had saved six or seven-figure sums from the reduction in the top rate from 50p to 45p in Mr Osborne's 2012 budget.

Speaking in Leeds, shadow chancellor Ed Balls seized on Mr Cameron and Chancellor George Osborne's failure to rule out a further cut in the top rate of income tax to 40p.

Mr Balls said: "We know that is their secret plan - another big tax cut for millionaires.

"How can it be fair when families here in Leeds and across the country are struggling and £1,100 a year worse-off?

"How can it be fair to have a tax cut for the very richest when our NHS is in crisis and going backwards?

"How can this be fair when we need to get the deficit down and the Tories are now planning deeper cuts in the next three years than the last five?"

Mr Balls said a cut in the top rate to 40p would save someone earning £1 million a year £340,000 over the course of the next Parliament while someone with income of £5 million would get a total tax cut of £1.94 million over the five-year period.

Meanwhile, he said that unfunded Conservative plans to cut £10 million from income tax by raising thresholds for the 20p and 40p rates would require the equivalent of a two-point rise in VAT, costing an average couple with children £1,440 over four years.

Voters would not believe Mr Cameron's "desperate and panicky" denial that he intends to increase the consumption tax because Conservatives had "a track record of breaking their promises on VAT", he said.

The Prime Minister said a majority Conservative government would cut taxes for workers and savers "again and again and again" while a minority Labour administration propped up by the Scottish National Party offered a "nightmare scenario" of increased tax and debt.

Mr Cameron risked aggravating Deputy Prime Minister Nick Clegg by saying that the rise from £6,475 to £10,600 over the course of the Parliament in the amount workers can earn before becoming liable for income tax was "all thanks to the Conservatives".

Increasing the threshold was a flagship Liberal Democrat policy at the 2010 general election, which Mr Cameron dismissed at the time as "unaffordable", and Mr Clegg has said that Tory ministers opposed rises in the threshold during budget negotiations within the coalition.

During an election visit to south-west London, the Lib Dem leader said that he had pushed for tax cuts for low and middle-income workers at every one of the coalition's budgets while Conservatives were " constantly pulling in an opposite direction" and demanding instead cuts in inheritance tax, tax breaks for married couples and tax incentives for workers to give up employment rights.

"They were always more interested in tax cuts for people at the top rather than tax cuts for people at the bottom or the middle," said Mr Clegg.

Lib Dem Chief Secretary to the Treasury Danny Alexander claimed one unnamed Tory minister had even told him in negotiations over tax: "You take care of the workers and we'll take care of the bosses" while Mr Clegg described Mr Osborne as "a very dangerous man" because of his promise to eliminate the deficit by spending cuts alone.

Mr Cameron dismissed Mr Clegg's comments as "the odd noise-off from a deputy", adding: "I think you will find the minor parties in this election saying increasingly desperate things in order to try and grab some attention."

He added: "This tax cut has been delivered by a Conservative prime minister and a Conservative chancellor. And here's the thing - you can only cut people's taxes if you get on top of waste, if you find efficiencies in government, if you cut back programmes that aren't working.

"I've got a very clear memory of the last five years and it is of almost everyone else in British politics - particularly Labour, but many other minor parties as well - saying you couldn't make this saving, you couldn't reform welfare, you couldn't find efficiencies. If you don't do those things, you end up putting people's taxes up."

Mr Cameron said: "There's a very fundamental choice at the election - you stay on track with the Conservatives, delivering the jobs, delivering the growth, cutting taxes, helping working people, or you put it at risk with Labour ... potentially backed up by Nicola Sturgeon and the Scottish National Party, who see Ed Miliband as a weak leader that they can push around and push into even more debt, even more taxes, even more unlimited welfare."

Mr Cameron said Liberal Democrat candidates in the election "can't guarantee that the plan will continue, that the team running the country will continue - they are at risk of propping up a Labour government also propped up by Nicola Sturgeon, with the debt, the taxes, the bloat, the waste, the unlimited welfare, that would wreck our economy".

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