Pre-election tax war hots up

The Tories have made it plain their tax strategy is a key part of their election campaign after pledging to take many pensioners out of 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 in effect April 2001, put forward by the Tories for a family with one child under 5 would gain Pounds 200 a year or nearly Pounds 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 Pounds 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 £4535 to her husband who is a basic taxpayer to an allowance of Pounds 9970. Higher rate taxpayers would gain less Pounds 660 on a man of around Pounds 60,000.

Chief secretary to the treasury Andrew Smith ridiculed Tory claims that Pounds 8bn savings in government spending can pay for their 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 Mr Hague said it did help those married couples when they needed help with the most ‘realistic’ costs.

Links Budget 2001

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