The Prime Minister has been stung by widespread outrage over Chancellor George Osborne’s plans to axe child benefit for higher-rate taxpayers, costing a family with two children £1752 a year.
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Last night he was forced into an embarrassing apology over the issue and his failure to outline the policy ahead of May’s General Election.
“We did not outline all of those cuts,” he admitted.
“We did not know exactly the situation we were going to inherit. But yes, I acknowledge this was not in our manifesto.
“Of course, I’m sorry about that but we need to be clear about why we’re doing what we’re doing.”
The Conservatives’ plan to target any family where one parent is a higher-rate taxpayer has backfired with critics, including Tory traditionalists and family campaigners, pointing out that the policy will hit single-income families the hardest.
A family where one parent works and earns more than £43,875 will lose their child benefit, while a family where both parents work, earning a combined salary of up to £87,748, will continue to receive payments.
But Mr Cameron last night defended the proposal -- due to be implemented in 2013 -- while promising that the Coalition will “recognise marriage in the tax system”.
“It means we’re saving a billion pounds that we then don’t have to take off less well-off households or the education budget or elsewhere,” he said.
“Of course, there is no perfect way of doing this. We have looked at all the alternatives and we continue to look at all the alternatives, but the only way if you want to assess household income for people on 40, 50, 60 thousand pounds is to enmesh all of those households into a new form of tax credit system which would be bureaucratic, complicated and potentially also unfair.”
Iain Duncan Smith suggested Mr Osborne brought forward his controversial child benefit announcement because of pressure from the media. The Work and Pensions Secretary last night said the policy was presented when it was because journalists were “dwelling on this the whole time”.
Mr Cameron will make his pledge on married couples’ tax breaks today in his first speech to the Conservative Party conference as Prime Minister, but the timing and details have still to be worked out.
While the planned tax break for married couples might cushion some of the losses incurred by the axing of child benefit, it is likely to fall well short of full compensation.
Calculations by respected think-tank, the Institute of Fiscal Studies, showed that reintroducing the married couples’ tax allowance would cost £1.6 billion a year -- compared to the £1bn a year the Coalition hopes to save with its child benefit plans.
Labour seized on Mr Cameron’s apology with Ann McKechin, the Shadow Scotland Office minister, saying: “This is rapidly descending into a shambles.
“The Tories clearly haven’t thought through their policies and they are now unravelling by the minute.”
She added: “The tragedy is the victims in all this are children. It seems that the two most powerful men in the British Government haven’t thought about what they are doing and, on an issue like this, it is unforgivable.”
Labour claimed children were bearing the brunt of Government measures aimed at bringing down the £109bn structural deficit, despite Mr Cameron’s proclaimed desire to run “the most family friendly Government we’ve ever had”.
Yesterday, anger mounted at the Tory conference over the “unfairness” to some hard-working families at the axing of child benefit.
Senior backbencher David Davis said: “If you’re carrying out a programme of cuts, you’ve got to do things that are seen to be fair and where you have perhaps one family with £80,000 a year getting child benefit and another family on £44,000 a year not getting child benefit, that would be seen to be unfair.”
He added: “The aim is fine, the detail needs to be reworked. We’ve got until 2013 to fine tune this and I think he will. We’ve got a couple of years to get this sorted out.”
Before the election, the Conservative manifesto promised to recognise marriage in the tax system by allowing basic rate taxpayers to transfer unused allowances worth up to £150 a year to their spouses, at an estimated cost of around £550 million.
But introducing this would not compensate those higher-rate taxpayers who will lose out when their child benefit is axed from 2013.
However, Mr Cameron hinted that this idea could be extended to higher-rate payers.
When asked if this would be the case, he smiled and replied: “One thing at a time.”
Tory sources made clear the Government had “not slammed the door” on extending it but admitted the party had not yet had discussions about it with their Liberal Democrat partners.
Before the election, Deputy Prime Minister Nick Clegg dismissed the proposal as “patronising drivel”.
The Coalition Agreement allows LibDem MPs to abstain in votes on it.