Letwin promises £2bn tax cuts for low-paid workers

The Conservative Party will direct most of its remaining £2.7bn of promised tax cuts at the low paid, Oliver Letwin, the shadow Chancellor, says.

The Conservative Party will direct most of its remaining £2.7bn of promised tax cuts at the low paid, Oliver Letwin, the shadow Chancellor, says.

He told The Independent that the Tories would announce "progressive tax cuts" with a social as well as economic purpose after Gordon Brown delivers his ninth Budget on Wednesday. The move is an attempt to shed the Tories' traditional image as a party that represents the interests of the better-off. The Tories will fight the general election on a firm pledge of £4bn of tax cuts. They have already announced that £1.3bn will be spent on reducing pensioners' council tax bills.

Mr Letwin plans to give priority to taking low-paid workers out of tax. He is also expected to promise that a Tory government would take some people on middle incomes out of the 40p top tax bracket. He may also pledge a higher threshold for inheritance tax but is unlikely to have room to cut stamp duty on house purchases.

The shadow Chancellor said the help for pensioners would benefit those who have least. "That is the same pattern you will find in the remainder of what we announce. It is aimed at people who don't have very much money, are not millionaires, and are working hard and have quite a struggle."

Mr Letwin endorsed a call in The Independent last week by the former shadow cabinet minister John Bercow for the Tories to champion the working poor rather than the rich. He said: "John is absolutely right that we have to recognise the hard work and contribution made by people bringing up families who don't have much money. Both from an economic and social point of view, we are trying to recognise, reward and give incentives to those people, not to open up vast new wealth for the millionaires. We want to make the tax system fairer and simpler. We are aiming at trying to address fairness and not benefit the very rich."

Although Mr Brown's Budget will contain sweeteners for working families with children and pensioners hit by council tax increases, he is expected to resist calls for a giveaway package. Paul Boateng, the Chief Secretary to the Treasury, said: "Oliver Letwin must tell the British people the truth about where his £35bn of cuts will fall; which schools, which hospitals would close, how many doctors, nurses and teachers he would sack?"

Mr Brown has been examining whether he has scope to reduce stamp duty for new homeowners after warnings that first-time buyers are being priced out of the property market. But the Treasury categorically denied as "nonsense" reports that he would impose capital gains tax of 40 per cent on the profits on house sales.

Sir Digby Jones, director general of the Confederation of British Industry, called on the Chancellor to produce a Budget that contained "boringly, predictably nothing", saying on GMTV: "We don't want him to listen to the siren calls of the Labour backbenchers in marginal constituencies who say, 'Oh Gordon, give it away, I'm stuck here'. We need him to leave well alone."