Jeremy Hunt has challenged Rachel Reeves to set out how Labour will prevent millions of people from being dragged into higher tax rates.
The Chancellor, who has himself faced questions over “fiscal drag”, claimed “all we’ve actually seen is plans to spend more”.
Ms Reeves had said consumer champion Martin Lewis is “right” that cuts to national insurance are being wiped out by frozen tax thresholds.
But Mr Hunt warned Labour: “If you want to criticise the freezing of tax thresholds, where is your plan to unfreeze them? As ever with Labour, all we’ve actually seen is plans to spend more (£28 billion a year more) not tax less. In other words, taxes going UP not down. Happy New Year!”
Almost six and a half million voters will be paying the 40 per cent tax rate by the next election, data from the Office of Budget Responsibility (OBR) showed.
This is a rise of more than 60 per cent in five years.
Ms Reeves also said “the Conservatives have raised taxes on working people to their highest level since WWII.”
But Mr Hunt has hinted that more tax cuts could be on the way in the spring, saying lower-taxed economies were more “dynamic”.
Speaking to The Rest Is Money podcast, hosted by Robert Peston and Steph McGovern, the Chancellor said: “If you look over the last decade… the advanced economies that have grown the fastest have been the ones with lower taxes, not higher taxes.
“In that period when I wasn’t making a profit, the taxes that bothered me the most were the taxes you have to pay even before you’ve made a penny of profit.
“So for example, business rates, employers’ National Insurance contributions, these are really expensive taxes that you have to pay right up front. So if you can bring those taxes down, you reduce the number of businesses that go bust, you make it easier for businesses to get off the ground.”
He added: “As a Conservative I really do believe that lower taxed economies are more dynamic, more entrepreneurial, more energetic. And that’s how we get competitive.”
The Chancellor, who will deliver a spring Budget in March, told the Martin Lewis Money Show Live on Tuesday evening that taxes will not return to pre-pandemic levels in “one go”. However, Mr Hunt did not give any timetable for when further cuts could take place.
“After a period in which taxes have gone up in order to pay for the costs of the pandemic or the £3,500 of help we gave people in the cost of living crisis to a typical family, we now want to bring that tax burden back down,” Mr Hunt told the presenter.
“Now we can’t get all the way back to where we were pre-pandemic in one go, but we can make a start. And this is about £1,000, just under £1,000 for a typical two-earner family. But we would like to go further as and when it’s affordable and responsible to do so.”
It comes after a two percentage point cut in national insurance, from 12% to 10%, took effect last Saturday.
Several economists have pointed to the fact that despite the national insurance cut, many households are still facing the burden of high taxes.
Some Tory MPs are lobbying the Chancellor to push ahead with tax cuts in a bid to woo voters.
