Brown planning tax cuts for families in bid to blunt Tory election pledge

Gordon Brown will announce more tax cuts before the general election in an attempt to neutralise the keynote pledge to lower taxes to be included in the Conservative Party's manifesto.

Gordon Brown will announce more tax cuts before the general election in an attempt to neutralise the keynote pledge to lower taxes to be included in the Conservative Party's manifesto.

Families with children are the most likely to benefit as the Chancellor uses some of the Treasury's multi-billion pound surplus to reduce the tax burden. His proposals include making the working families tax credit more generous and bringing in a new child tax credit next March, which will give millions of families twice as much as the married couple's allowance it will replace.

Mr Brown is thought unlikely to reduce the basic rate of income tax before the election on top of the 1p cut that took effect in April. But he is expected to promise more "targeted tax cuts" when he unveils his draft Budget next Wednesday, with significant tax-cutting measures included in the Budget next March.

There was speculation this week that the Government was unlikely to offer further tax cuts, after the Chief Treasury Secretary, Andrew Smith, said Labour would not fund them by borrowing. But a close ally of Mr Brown said yesterday: "The idea that we have given up on further tax cuts is nonsense. People who are saying that are going to look very silly."

Mr Brown believes Labour can enter the election offering "the best of both worlds", which combines higher spending on public services and tax cuts. He hopes this will limit the appeal of the Tories, who are expected to pledge to knock 1p or 2p off the 22p basic rate.

Yesterday the Chancellor told the Cabinet that he would continue with his "prudent approach" based on "sound finances" when he sketched out the economic background to next week's statement. He said the challenge for the Government was to promote higher productivity and rising prosperity for all.

Mr Brown dismissed City forecasts that his surplus could be as high as £16bn.

Last night Michael Portillo, the shadow Chancellor, dismissed Mr Brown's tax-cutting credentials. He told a Carlton Club meeting: "Labour is the high tax party. A typical family is paying £670 a year in tax under Labour. Gordon Brown has raised taxes on hard-working families, pensioners and British business."

The Liberal Democrats said yesterday that Labour had spent a smaller proportion of the nation's wealth on public services than the last Conservative government.

"For anybody wondering why there is still a problemin the health service, why there is still a problem in education, why pensioners are getting so little, it is because Labour are spending less, not more," said Matthew Taylor, the Liberal Democrats' economics spokesman.