Tax allowance 'is first step towards recognising marriage in tax system'

http://www.theguardian.com/politics/2013/dec/04/cameron-osborne-marriage-tax-allowance

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A transferrable marriage tax allowance, to be unveiled by George Osborne in his autumn statement on Thursday, will be the first step towards recognising marriage in the tax system, David Cameron has said.

In a sign that he is prepared to challenge the chancellor, who is highly sceptical of the allowance, the prime minister said he would like to extend the measure.

Osborne will outline in the autumn statement how he will pay for the £600m costs of the £1,000 allowance for basic-rate taxpayers, of whom one spouse or civil partner must be earning below the personal allowance of £10,000.

The chancellor believes the allowance sends an unhelpful, socially conservative message. But he accepts he must support Cameron, who went out of his way on Tuesday to talk about the way in which he works "hand in glove" with Osborne.

Speaking in Shanghai, the prime minister dashed the hopes of Tories on the right who want him to offer hope for middle-income earners drawn over the 40p tax threshold as a result of inflation, a process known as "fiscal drag". He said he would focus instead on building up marriage tax allowance and raising the personal tax allowance for low-income earners.

"We will be making this change to back marriage in the tax system," Cameron said. "It's something I have long wanted to do, so I am pleased we will be achieving it. I believe in marriage, I believe marriage should be recognised in the tax system. I see this as, yes, a start of something I would like to extend further."

Cameron indicated that he might be prepared to outflank Nick Clegg, who has called for the personal allowance to be increased to £10,500 by April 2015. There are suggestions that Cameron may be prepared to see this rise to £10,750 by then.

The prime minister said: "Lifting the income tax threshold benefits all but the richest because it does benefit people on middle and even higher levels of pay. By next April it will be worth around £705 to the typical taxpayer, so I think it's been a very good way of trying to help families with their finances at a difficult time, but recognising that there should be a benefit as we keep the costs of government down and pay down the deficit."

Cameron said that, in an ideal world, he would cut taxes. But he dashed the hopes of the Free Enterprise Group who have been calling for tax cuts for middle-income earners when he said that he had to prioritise the elimination of the structural budget deficit.

"I'm a low-tax Tory, I believe in allowing people to keep more of their own money to spend as they choose; that's a very important part of my political views, always has been and always will be. But I'm also a fiscal conservative, I believe the first duty of government is to safeguard our economy, and the economy isn't safeguarded properly until you deal with your deficit and make sure that you're in a position where future problems that could come down the road, you're able to absorb them."

The prime minister went out of his way to say he works closely with the chancellor. He said: "I have a very, very strong relationship with the chancellor. We work together hand in glove.

"I often ponder how I simply don't understand how government could have functioned when the relationship did between Blair and Brown got as bad as it did. It's only when you're prime minister that you see how impossible that must have been.

"It's an extremely good relationship – we work very, very closely together. I think it's one the strengths of the government. Our relationship is as good as it's ever been, and it's one of the strengths the government."

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