17/02/2015 06:09 GMT | Updated 17/02/2015 06:59 GMT

George Osborne Defends Tax Record After Embarrassing Video Re-Emerges

Nigel Roddis via Getty Images
LEEDS, ENGLAND - FEBRUARY 05: Britain's Chancellor Of The Exchequer George Osborne (R) and Prime Minister David Cameron speak to business leaders at the AQL centre on February 5, 2015 in Leeds, England. The politicians are on a tour of Yorkshire to promote investment in the region. (Photo by Nigel Roddis/Getty Images)

George Osborne has been forced to defend the coalition's record on clamping down on tax dodgers amid controversy over its failure to prosecute evaders who held accounts at HSBC in Switzerland.

The embarrassment was heightened on Monday after the Huffington Post UK dug up a video showing a young Osborne advising someone on television how to avoid paying inheritance tax using "clever" financial products.

Osborne, in 2003, advises on how to avoid inheritance tax

Back in May 2003, then backbencher Osborne, starring as the "parliamentary doctor" on the BBC's Daily Politics, gave this advice to a caller - 'Bill'- but then admitted; "I probably shouldn't be advocating this on television."

Later on, in 2007, the then shadow chancellor Osborne did his best to help people like Bill by promising to triple the inheritance tax threshold from £300,000 to £1 million if Tories won the next election, a promise he was not able to fulfill in the end.

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Meanwhile, Labour MPs accused the Chancellor of being "self-serving" and "out of touch". Teresa Pearce, member of the influential Treasury select committee, told the Huffington Post UK: "I don't think that avoided tax is "clever", I think it is selfish and self-serving, so I am not surprised by Osborne's comment.

"As US judge Oliver Wendell Jones once famously said " I like paying my taxes, with them I buy civilisation," I agree wholeheartedly with that statement. It might not be "clever", but it's morally right."

Labour MP Sheila GIlmore added: ‘This clip of George Osborne encouraging people to avoid tax shows the Tories really do believe that ‘everyone does it’, and highlights how out of touch they are with working people."

Gilmore also attacked the coalition's failure to crack down on tax dodgers in the same week that David Cameron has unveiled plans to force young jobseekers to carry out community work "from day one" if they want to keep claiming benefits.

"Instead of cutting vital support for young people and those on sickness benefits, David Cameron should focus on cracking down on tax avoidance and evasion," she said.

The Chancellor has now given an interview to Sky News in an attempt to break, what Labour called, his "week of silence" over the coalition's stance on HSBC and the tax arrangements of those using its Swiss private banking arm.

Osborne speaks to Sky News on tax avoidance

He repeatedly refused to comment directly on HSBC, but insisted: "My responsibility is to set the tax laws of this country and I've taken more steps than any previous chancellor to make sure we tackle aggressive tax planning, tax evasion and that we get money from Swiss bank accounts."

Osborne also praised Tory peer Lord Green, the former HSBC chair who served as the coalition's trade minister, describing him as "very effective".

However, the chancellor's comments are unlikely to appease Labour, who have doggedly insisted there are a range of questions about the coalition's stance towards HSBC and Lord Green.

Chris Leslie, the shadow chief secretary to the Treasury, said in a statement: “Why has there only been one prosecution out of 1,100 names? Did David Cameron and George Osborne discuss tax evasion at HSBC with Lord Green? Why did they appoint Lord Green as a Tory minister months after the government received these files? Why did George Osborne and the Treasury sign a deal with the Swiss in 2012, which prevents the UK from actively obtaining similar information in the future?

“In this row over tax evasion David Cameron and George Osborne are now guilty of political evasion.”