UK Tories Fail To Find Message With Marriage Tax Plans

by Robert Lee, Tax-News.com, London

25 January 2010

The political war of words over the UK Conservative Party's plans to provide a tax break to married couples in an attempt to strengthen families is continuing, as it emerges that fiscal constraints will limit party leader David Cameron's room for manoeuver.

A policy document launched by Cameron on January 22, while short on specifics, revealed that the party, if elected at the forthcoming general election, would "recognize marriage and civil partnerships in the tax system in the next Parliament."

"We are one of the very few countries in the Western world that doesn’t do so and we will put that right. This will send an important signal that we value the commitment that people make when they get married," the policy document stated.

The Tories want to introduce a transferable tax allowance between married couples. However, with little in the Treasury kitty for tax cuts over the course of the next parliament, the party has been forced to limit its ambition and is proposing that, initially, only married couples with children under the age of three years old will be able to benefit from the break.

The governing Labour Party, which has already dismissed the Tories' plans for a marriage tax break as discriminatory, says that the plans will only benefit 6% of married couples.

It is estimated that providing a full transferable tax allowance between married couples will cost in the region of GBP4bn, a figure that will not be found easily given the restraints on future government tax and spending policy. The current Tory proposals will cost a more modest GBP600,000.

However, according to UK newspaper the Daily Telegraph, the Tories are planning to create a "families fund" paid for out of revenues collected from new green taxes that would be put to use providing tax cuts for families – one of the party's flagship policies as it gears up to fight the election, which must be held in the first half of 2010.

One party insider told the paper that one of the "green taxes" under consideration is the reintroduction of the fuel duty escalator, which was introduced in 1993 by the previous Conservative administration and ensured that fuel duty rose a few pence above inflation each year. The fuel duty escalator was abolished in 2000 by Prime Minister Gordon Brown when he was Chancellor of the Exchequer, amid strong protests about the high cost of fuel.

Given the fragile nature of the economy and the strength of feeling over the level of tax on road transport in the UK, such a policy would be controversial. Indeed, Shadow Chancellor George Osborne has dismissed the report as "wrong," telling the BBC that the party has no plans to "jack up road taxes in order to fund anything."

"It bears no relation to the reality of our thinking in this area," he insisted.

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