Worsening public finances mean chancellor will have to reschedule changes that could save some families £1,000
A tax break to ease the costs of childcare, which was at the heart of a new year relaunch of the coalition, is to be delayed as worsening public finances leave George Osborne struggling to balance the nation’s books.
David Cameron and Nick Clegg are to join forces on Tuesday to launch a series of childcare initiatives which the prime minister described last week as a “very major step forward”.
But Osborne is expected to announce in the budget on Wednesday that it will take time, possibly until after the general election in 2015, to add a new tax break of up to £1,000 to existing childcare help.
The chancellor will unveil a crackdown on offshore tax avoidance by strengthening legislation to prevent companies paying employees through offshore intermediaries based in places such as Jersey. Up to 100,000 workers are paid this way, costing the exchequer nearly £100m a year.
Danny Alexander, who was tipped off to the practice by a stranger at Inverness airport, will tell the Scottish Lib Dem conference: “In the budget we will introduce new powers to clamp down on companies who avoid tax by putting their payrolls in tax havens. Our message is clear: British firms employing British workers must pay British taxes.”
Labour will attack the delay in the childcare tax break, blaming the move on the poor state of the public finances, after the Institute for Fiscal Studies warned that the chancellor is likely to have to admit that borrowing will increase this year.
Stephen Twigg, the shadow education secretary, said: “David Cameron’s government will have cost parents £15bn in support by the next election. Families are being hit in the pocket, and they are seeing their local children’s centres closing down.
” Mums need real help now, not years down the line. The only people who will benefit this April are the millionaires who are getting a tax cut. Parents need to be supported so they can get back into work and get our economy growing again.”
The Treasury is likely to dismiss Labour’s argument and to say that a complex tax break cannot be introduced immediately and that the delay has been caused by the practicalities of implementing a major change. Work will have to be carried out to target the right people.
Osborne is understood to be keen to introduce the change as quickly as possible. But after last year’s budget – when he announced a cut in the top rate of income tax from 50p to 45p, which led to rows about the “granny tax” and the “pasty tax” – the chancellor wants to make sure the implementation of a childcare tax break is watertight.
It is understood that the chancellor will give an indication of the year, though not the month, in which he hopes to introduce the change. Under one scenario doing the rounds in Whitehall, he could announce that once the Liberal Democrat goal of raising the personal tax allowance has reached £10,000, the focus could shift to a childcare tax allowance.
The prime minister will argue on Saturday that help for childcare lies at the heart of his campaign to build an “aspiration nation”. In his speech to the Conservative spring forum, he will say: “The global race is not just about GDP. It’s about saying to the mum who’s worried about her children’s future, ‘We are building a country where there is a future, so your kids won’t have to get on a plane to get on in life, they can make it right here in Britain. It’s what this party’s always been about – aspiration.”
He will hail three “great Conservatives” – Winston Churchill, Harold Macmillan and Margaret Thatcher – for putting in place ladders that help people improve their lives.
He will say: “Great Conservatives down the generations have put those ladders in place. When Churchill invented the labour exchanges that helped people into work. When Macmillan built new homes. When Thatcher fired up enterprise so people could start their own businesses. That’s what we’re doing in the Conservative party right now.”
Thatcher climbed up the ladder as the daughter of a grocer. But Churchill and Macmillan had less far to climb, if indeed they ever clambered upon the ladder. Churchill was the grandson of a duke, Macmillan the son-in-law of one.
Money | guardian.co.uk
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