1m more in the top tax bracket

THE number of people paying the top rate of tax has grown by a million since Labour came to power, official figures show. The increase - to three million - means huge numbers of ordinary workers such as policemen and teachers are paying 40% tax on some of their earnings.

The Inland Revenue statistics were obtained by Tory MPs, who say they are another example of Gordon Brown's 'stealth taxes'.

Tax experts say part of the reason for the rise is the buoyancy of the economy, which has led to higher wages. But they also point to the fact the Chancellor has consistently failed to raise in line with inflation the starting level for paying the top rate, which remains at £34,515. As a result, 260,000 more people will drift into the higher tax band in 2003-2004, when the Budget measures take effect.

The figures, obtained by former Tory Minister Michael Fallon, show that in the year ending 1997, when Labour came to power, there were 2,080,000 higher rate taxpayers. By the time Brown's Budget kicks in the total will have risen to a record 3,070,000.

Fallon confronted Brown with the figures on Wednesday during a hearing of the influential Treasury Select Committee, accusing him of deliberately targeting ordinary people with extra tax. 'He is dragging a quarter of a million more people a year into the higher tax bracket,' he said. 'He is going to squeeze people for even more tax for years to come.'

Brown said that Mr Fallon should look at the issue 'the other way'. He added: 'The reason people are earning more is as a result of the success of the economy. They are earning more and they are falling within that bracket.'

In heated exchanges during the hearing, Brown also insisted there was no 'black hole' in his spending plans for the National Health Service. He said his five-year plan to raise health spending by £40bn was fully covered by the tax increases announced in his Budget statement last week. And he flatly denied a claim by the financial think-tank the Institute for Fiscal Studies (IFS) that he would have to find a further £7bn to cover the final two years of the plan. 'I think the IFS will be in a position, I hope, to correct the wrong impression given about these figures,' he told the committee.

Pressed on the figures by Tory MP David Ruffley, Brown said: 'That is absolutely untrue. When you said there was a black hole you were acting on wrong and erroneous information. Our spending on the NHS is a five-year plan. Our spending is met by announcements made during the Budget. The IFS are wrong.'

Nevertheless, the Chancellor repeatedly refused to rule out future tax rises. 'No Chancellor ever talks about these things between Budgets,' he said.