DAVID Cameron will today pledge to press ahead with a married couple’s tax allowance, in a move designed to compensate some families who are about to lose their child benefit.
The Prime Minister will tell delegates at the Tory conference that the coalition will “recognise marriage in the tax system”, after a massive backlash over child benefit cuts that will penalise stay-at-home mothers and single parents.
Before the general election, the Tories pledged to introduce an allowance for married couples and those in civil partnerships, but said it would only be given when both partners paid the basic rate of tax.
But last night aides to the Prime Minister said he could expand the policy to cover families with one higher-rate taxpayer.
“We certainly haven’t slammed the door on that possibility,” said one.
And a source close to the chancellor told City A.M. the allowance, to be be introduced before the end of the parliament in 2015, would apply to some higher-rate taxpayers who have lost out from the cuts to child benefit.
The Prime Minister is expanding the policy to defuse the row over the government’s decision to scrap child benefit for 1.2m families that contain a higher-rate tax payer, in a move that is expected to save the exchequer around £1bn a year.
The change will punish families that have one adult paying the higher rate of tax. From 2013, a two-child family with a father that earns £44,000-a-year and a stay-at-home mother will lose £1,700 a year in child benefit. But a two-earner family where both parents earn £42,000 a year – giving them a combined household income of £84,000 – will continue to receive their child benefit.
During the election, the Tories unveiled plans to make up to £750 of the personal allowance transferable between adults who were married.
The Institute of Fiscal Studies said the plan would cost the exchequer £550m in foregone revenue.
But that plan only applied to couples where the higher-income member was a basic-rate tax payer. Extending it to higher-rate taxpayers as well could wipe out most of the £1bn the government will save by scaling back child benefit.
The massive backlash over child benefit cuts has taken the Conservatives by surprise. Last night, Cameron used a television interview to apologise for not including the plans in his election manifesto, while chancellor George Osborne wrote to MPs to explain the policy.
Meanwhile, the Prime Minister will today champion the self-employed over “big business”, as he seeks to regain the political initiative and reengage with voters.
He will say: “When you think of a wealth creator, don’t think of the tycoon in the glass tower. Think of the man who gets up and leaves the house before dawn to go out and clean the windows.”
“The whole point is it’s not glamorous millionaires who are going to get us out of this mess,” said one Tory strategist.
The Prime Minister is also expected to try and redefine the debate over “fairness”, after the IFS and Labour accused the government of delivering a “regressive” budget that will hit the poorest hardest.
“For too long, we have measured success in tackling poverty by the size of the cheque we give people. We say: let’s measure our success by the chance we give,” Cameron will say.