Wednesday 6 October 2010

Cameron ‘sorry’ for omitting child benefit cuts from manifesto

David Cameron was forced today to apologise to voters for breaking an election promise with his decision to withdraw child benefit from 1.2 million higher-rate taxpayers. On a day of policy wobbles in the Conservative high command, the prime minister acknowledged the decision – announced on Monday by the chancellor, George Osborne – had led to a storm of criticism from those claiming that axing child benefit had damaged the party's commitment to family values and undermined the universalist base of the welfare state, which he had promised to preserve in the election.

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"We did not outline all those cuts, we did not know exactly the situation we were going to inherit," he told ITV news. "But I acknowledge this was not in our manifesto. Of course I am sorry about that." In what was rapidly becoming a test of the Conservative leadership mettle at the party's conference in Birmingham, Osborne also rushed out a letter to all MPs explaining that a decision that seemed to punish its core aspirational support should not be seen in isolation.

Osborne wrote: "I know some have pointed out that this approach will leave households that do not contain a higher rate taxpayer, but whose joint income is above the higher-rate threshold, still in receipt of child benefit. The only way to assess these joint income families would be to create a new complex, costly and intrusive means test that would spread right up the income distribution."

In an effort to assuage the anger of some middle-class parents, he used television interviews throughout the day to highlight the party's longstanding plans to introduce a transferable tax allowance for married couples. "I have always supported the idea of supporting marriage through the tax system, specifically supporting the idea of a transferable tax allowance," he said.

When it was pointed out that the Tory pre-election plan to help married couples had been aimed only at basic-rate taxpayers, and would therefore not compensate higher-rate taxpayers for the loss of child benefit, government sources rapidly shifted ground.

The sources suggested the wording in the Lib Dem-Conservative coalition agreement left open the possibility of higher-rate taxpayers also being helped by the marriage tax allowance, which will be introduced by 2015. The initial proposal had been calculated by the Institute for Fiscal Studies as costing £550m and was worth £120 a year – a figure far lower than the loss due to the removal of child benefit.

Extending the scheme to higher-rate taxpayers might push the cost as high as £1bn, wiping out nearly all savings from withdrawing child benefit and rendering the exercise highly costly in political terms for zero financial reward. However, Cameron was given a boost when a YouGov poll for the Sun showed 83% of voters backed Osborne's announcement on child benefit.