TaxPersonal TaxTax – First salvo in election tax war.

Tax - First salvo in election tax war.

The pre-election tax war is hotting up as the Tory's promised major cuts, including the reintroduction of a transferable tax allowance for married couples with children under 11, comes under increasing attack by government ministers.

The Tories have made it plain tax strategy is a key part of their election campaign after pledging to take many pensioners out of the savings tax, to make the widowed mothers and widowed parents allowance tax free, and to improve the children’s tax credit. Labour has countered by dismissing the changes as ‘unfunded, unprincipled and unbelievable’.

Chancellor Gordon Brown is standing firm on his position of refusing to bring in big tax cuts before the next general election saying it would risk economic stability.

Instead targeted tax cuts will concentrate on the poor, hard working families, and children in poverty. He has hinted at increases in the child tax credit and the working family tax credit, which employers claim is making them do the work of the tax benefit system.

The changes to the child tax credit, due to come into effect April 2001, put forward by the Tories mean a family with one child under five would gain £200-a-year or nearly £4 a week.

But the high point of the announcement by Tory leader William Hague and shadow chancellor Michael Portillo is a tax cut of #1,000 for a married couple if one of them stays at home to look after a young child or disabled or elderly relative.

The move would allow a woman who doesn’t work with a child under 11 to transfer her entire personal allowance of £4,535 to her husband, raising his allowance. Higher rate taxpayers would gain less – £660 for a man on around £60,000.

Chief secretary to the treasury Andrew Smith ridiculed claims that #8bn savings in government spending can pay for Tory tax cut policies.

Smith said most married couples will gain nothing from the Tory changes because it excluded thousands without children, those with children over 11, and where both parents were in work not to mention lone mothers struggling to bring up children on their own.

But Hague said it did help married couples when they needed help with the most ‘realistic’ costs.

You can examine the election tax policies of both parties at www.labour.org.uk and www.conservatives.com.

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