Blair tells Brown: keep marriage tax break

TONY BLAIR has ruled out Gordon Brown's plan to scrap the married couples' tax allowance in this week's Budget because he believes it would undermine the Government's attempt to emphasise its commitment to the family.

The Prime Minister told the Chancellor that he should not remove the tax break for married people unless he could find an alternative measure for boosting family life, as the pounds 1.7bn it could raise would not be worth the political fallout among middle-England voters.

Treasury sources admitted last night that scrapping the allowance - worth pounds 285 a year to couples - would be out of tune with the Government's stated intention to make the family one of the three main themes of this year's Budget.

As Mr Brown and Mr Blair put the finishing touches to the Budget at Chequers yesterday, the chance of a tax on child benefit for top-rate taxpayers being introduced immediately was also receding. The Chancellor is likely to announce his intention to levy the tax, but delay its implementation.

Although Treasury officials believe they have worked out a mechanism for introducing the tax without undermining the principle of independent taxation for men and women, by charging it to any household where one partner is a top-rate taxpayer, there are concerns about the unpopularity of the measure.

In his Budget statement on Tuesday, Mr Brown will emphasise his commitment to tackling Britain's economic problems by promoting enterprise, encouraging work and boosting help for poor families. The announcements are expected to include the long-awaited new 10p starting rate of tax and a rise in the level at which employees start paying National Insurance Contributions. There could also be extra money targeted at children in families on means- tested benefits.

But Downing Street has stressed throughout the Budget negotiations that the middle classes must not feel that they are being hit too hard. It is likely that mortgage interest relief will be further cut or even scrapped and that stamp duty will go up to bring Britain's rates more into line with the rest of Europe.

But the Chancellor has backed away from plans to abolish the married couples' allowance because of Mr Blair's fears that this would be seized on as a symbolic attack on marriage by a government which has made much of its commitment to the family. The Tories would certainly have made political capital from the change because William Hague has already said that, if elected, he would boost the fiscal incentives for marriage.

The Budget will continue the Government's commitment to encouraging people to move from welfare into work, with an extension of the New Deal programme for older people and assistance for people without qualifications.

The Chancellor will also seek to boost small businesses and entrepreneurship. There will be new provisions to encourage share ownership among the workforces of companies, tax breaks for research and development and boosts for inventors.

New taxes, designed to reduce greenhouse gas emissions by businesses, are also expected to be introduced. Mr Brown is likely to implement the recommendation, set out in a report by Lord Marshall, the chairman of British Airways, that there should be a tax on the energy used by businesses.

On Wednesday, Stephen Byers, the Trade and Industry Secretary, will also announce the Government's intention to introduce a new "consumer strategy". Supermarkets, high-street retailers and car dealers will all face an annual audit of their prices to ensure the British public is not paying more than people in other countries.