pounds 30 - is this enough to make you vote Tory?

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The Independent Online
The boost to pay packets from this year's income tax cuts will be felt from the end of April: just in time, the Government hopes, to help sway voting intentions for a May Day election.

The increase in after-tax pay for the majority of people will be in the range of pounds 15 to pounds 30 - the latter sum enough to pay for three bottles of Tesco Champagne; a meal for four at Pizzaland Manchester; a Superapex rail return from London to Edinburgh; a 22-minute mid-day call to Malagasay; or 12 swims at a local pool.

The reduction in the basic rate of income tax by 1p to 23p and increase in tax allowances announced in November's Budget take effect from 1 April and will increase most taxpayers' take-home pay by the end of the month. Somebody earning pounds 20,000 a year will gain an extra pounds 17 a month, and a pounds 30,000 salary will generate an extra pounds 31 a month after tax.

This year's tax boost is similar in size to last year's, which delivered the biggest one-off increase in spending power since 1986. This resulted in a huge improvement in consumer confidence last spring.

Surveys show that confidence has since recovered to levels last seen in the late 1980s, when the economy boomed following Nigel Lawson's 1p reduction in the basic rate of income tax. Government strategists are hoping that a similar boost this year will pay an electoral dividend.

People who will gain when the Alliance and Leicester and Woolwich building societies join the stock market, could also receive the letters telling them how many free shares they will get in the fortnight before 1 May. These two societies will give out share windfalls worth up to pounds 6bn in June, to be followed by the Halifax stock-market flotation worth pounds 10.4- 12bn in July.

The Conservatives' electoral hopes are resting on the economic upturn, and the tax cuts provide one of their strongest cards. Although mortgage costs are near to 30-year lows, the Chancellor of the Exchequer, Kenneth Clarke, has become embroiled in an embarrassing public row with Eddie George, Governor of the Bank of England, over whether or not interest rates should rise before the election.

Mr George has turned the heat up with an interview published in a German magazine today. Asked about whether interest rates should go up, Mr George downplayed the Chancellor's excuse - the strong pound - for not increasing the cost of borrowing.

Mr George said: "Past experience has shown that the danger is in not being able to recognise when to restrain domestic demand. Then interest rates have to be increased more strongly later, producing the type of `boom and bust' we are all seeking to avoid."

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