Tories higher rate tax promise

THE TORIES will enter the next General Election with a pledge to slash income tax for people earning more than £36,000, party sources have revealed.

Shadow Chancellor Oliver Letwin plans to raise thresholds to take key workers like school deputy heads, senior police officers and hospital matrons out of the 40% tax band.

The pledge will make tax the key battleground of the election, with Letwin's targeted cuts being set against Prime Minister Tony Blair's promise of 'prosperity for all'.

It has also caused tensions in the Shadow Cabinet, where some senior figures fear the party risks allowing itself to be branded by Labour as favouring the wealthy.

Under Letwin's plan, the income band where taxpayers begin to pay the 40p in the £ top rate would rise from £36,145 to about £40,800. That would have the effect of moving key workers like deputy heads, who have been pushed into the 40p band under Chancellor Gordon Brown's regime, back to the 22p basic rate.

It would be controversial because billionaires would benefit from the cut while lower income groups would not.

Letwin will keep his detailed plans under wraps until after Gordon Brown's pre-election Budget, to prevent the Chancellor putting up a rival pledge or simply stealing his idea. He aims to unveil a package of measures aimed at taxes that families are thought to regard as unfair, including possible cuts in inheritance tax, council tax and stamp duty.

The Conservatives will begin to hint more strongly at tax cuts this weekend when the final tally of Whitehall savings identified by City troubleshooter David James is published. James has found £30bn so far and is expected to to hit a final total of £35bn.

About £10bn is expected to be handed back to voters in the form of tax cuts. The rest will be used to fill what Letwin calls 'a black hole' in Labour's budget and to reinvest in schools, hospitals and foreign aid.

A source close to Letwin said: 'Nothing has yet been decided but Oliver has said he will make clear commitments on tax before the election.'

A senior Shadow minister claimed: 'Oliver's plan will include cutting the 40p tax band. The debate is about whether to announce it now and have more time to convince voters, or keep it until after the Budget and risk having too little time for campaigning.'