Chancellor Gordon Brown hit back at a former senior Cabinet colleague yesterday over claims that his tax credit system had hit hard-working families.

Darlington MP Alan Milburn - once Mr Brown's deputy at the Treasury - complained this week that a million more people now faced a marginal tax rate of 60 per cent.

That means they would pocket just 40p for every extra pound they earned, sparking fears for the MP that people could be put off going out to work.

His comments were seen as part of a co-ordinated Blairite assault amid mounting Labour tension over his expected succession as PM.

Faced with the charges at a Commons committee hearing yesterday, the Chancellor insisted the opposite was true and that higher marginal tax rates had been slashed.

The growing numbers were part of a "success story" but more needed to be done to reduce the numbers facing 60 per cent rates, he conceded.

"The fact that we have got more people into work and therefore people are claiming work tax credit or children's tax credit is a success story," he said.

Mr Brown insisted the tax burden for millions of families had already been reduced.

"There are three million families with children who effectively have their income tax liability wiped out because they have child benefit and child tax credits.

"The effect of the tax credits has been to increase the income of the lowest paid families in this country, make work pay for them, as well as reduce child poverty.

"I just do not accept the contention you are making in your question that the system of child tax credits has made it less attractive to people to work - it has actually made it more attractive."