Tories pledge family tax boost

Michael Portillo promises tax cut for families

Shadow chancellor Michael Portillo has pledged a future Conservative government would reduce the income tax payable by families with a child or children under five by £200 a year.

The move would be over and above any level of increase in the Children's Tax Credit which Chancellor Gordon Brown may announce in his March 7 budget.

Whatever marginal improvements there have been in Labour's attitude to industry, it remains - whether by conviction or default - a high-tax party

Michael Portillo

Mr Portillo made his announcement in a speech on Monday designed to emphasise the Tory claim to be the party of low taxation.

Further policy pledges, including special help for widows and widowers and how the Conservatives would recognise marriage in the tax system, will be made later this week, the shadow chancellor said.

His speech will again focus attention on the tax and spending battleground, likely to be one of the major themes of the general election widely expected this Spring.

It comes the day after Prime Minister Tony Blair declared he was "ready and waiting" to fight the next election on the economy.

Mr Blair highlighted a "proud hat-trick of good economic news" covering unemployment, inflation and the lowest sustained interest rates for almost 40 years.

But his analysis was challenged in a scathing attack by Mr Portillo, who insisted Labour remained "by conviction or default" a high-tax party.

People know you can't get something for nothing - you can only cut taxes by cutting schools, hospitals and pensions

Matthew Taylor
Liberal Democrats

He set out what he called the economic, political and moral case for lower taxation and pledged the Conservatives to reversing the trend of more means-testing, dependency on the state, and falling incomes which he claimed had been triggered by Labour tax policies.

Emphasising how a future Tory administration would help families, Mr Portillo pledged major reforms to the Children's Tax Credit (CTC).

Due to be introduced in April, the tax credit is currently set at £442 a year for parents earning less than around £40,000.

The chancellor has already signalled the CTC could be raised to £520 in the budget - but Mr Portillo pledged a Tory government would beat whatever figure is announced by a £200 annual income tax cut for families with young children, amounting to £4 a week.

He told the Centre for Policy Studies in London the proposal would cost around £400m and bring to £4.4bn the reductions in income tax spelt out by the Conservatives.

'Targeted reductions'

Targeted tax reductions totalling £8bn would be introduced within the first two years of a Tory government, Mr Portillo pledged.

Further tax cuts - possibly including across-the-board reductions in income tax - would come on stream during the second half of its term.

Turning to his announcement he said: "I will devote £400m of the £8bn to reducing income tax for parents, and I believe that it would be best to give extra help to families with the youngest children.

"When children are not yet at school, they make the greatest demands in terms of expense, time and nervous energy.

"I therefore propose to reduce the tax payable by families with a child under the age of five by £200 over and above the credit that Gordon Brown may announce in the budget, whether that is £520 or any other sum."

Tory plans disputed

The government disputes the Tory figures, saying their plans will result in £18bn of cuts in public services.

Liberal Democrat treasury spokesman Matthew Taylor said the Conservatives could only cut taxes by cutting benefits for the poor, raising interest rates on student loans, and forcing people to use private health care and education.

"The Conservatives claim they can raise spending, cut taxes and pretend they can balance the books - which would be funny if they weren't serious.

"The simple truth is Tory tax plans just don't add up," he said.