More than 1.8 million low-paid workers face losing 60p more for every extra £1 they earn as a result of tax changes that come into effect next month.

Gordon Brown and Alistair Darling were accused of deepening the poverty trap by scrapping the 10p starting rate of income tax and clawing back tax credits from those earning more than £6,420.

The measures would affect dinner ladies and hospital cleaners, while millionaires were taxed at 40 per cent, said Stephen Byers, the former Transport Secretary. Figures included in this week’s Budget showed that the numbers now subject to tax rates equivalent to 60 per cent or more will exceed 1.8 million in the coming year, compared with 760,000 a decade ago.

“Poorly paid people are facing a reduction in their income of over 60 per cent — higher than millionaires who are paying 40 per cent income tax. For a progressive Government this is not an acceptable situation,” Mr Byers told MPs yesterday.

Rose-tinted specs fail to offer hope

The obvious justification for Mr Darling’s relatively upbeat scenario is that the outlook is fraught with uncertainty

BACKGROUND

• Darling's first Budget: the main points

• The Chancellor's speech in full

• Darlings first Budget: the reaction

• Chancellor hits the home budget as his debts soar

• Need to know: Budget 2008

The Chancellor delivers a modest Budget

As so often is the case, virtue, in terms of improving public finances, is not now, but at least a year away

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The close ally of Tony Blair and a long-time critic of Mr Brown’s tax credit system called for large increases in the national minimum wage to help to release more people from the poverty trap.

Ministers said that they were right to concentrate on meeting the Government’s target to halve the number of children in poverty. Poorer parents are to be offered £200 to take up free nursery places and could receive further cash payments to meet targets set for their child, it emerged yesterday.

From next year they will be offered cash to attend a “taster” session with their young child during a trial of child development grants in ten council areas. The Department for Children, Schools and Families said that it hoped to replicate a scheme set up last year by Michael Bloomberg, the Mayor of New York. The project, Opportunity NYC, rewards families for meeting education and health targets with cash payments.

Ministers said that they intended to help teenage mothers by introducing “new approaches to improving supported accommodation for teenage parents”. Based on existing schemes that intend to keep young people off the streets, mothers would be allowed to live independently in return for training or working.

David Cameron joined the battle on family policy last night by proposing that fathers and mothers could be paid to stay at home at the same time to look after their newborn children.

The Conservative leader said that couples should be allowed to decide how to allocate 38 weeks of state-paid parental leave after an initial 14 weeks during which the £112-a-week benefit was payable to the mother. The Tory proposal goes beyond government plans in allowing parents to take their leave simultaneously and reducing from 26 weeks to 14 weeks the period that the benefit must be claimed by mothers.

Mr Cameron said that families would be helped by increased flexibility. “The world is changing, men want to be more involved in bringing up their children,” he said.

John Hutton, the Business Secretary, said that few couples could live on state benefits. “Even if you doubled statutory maternity pay and paid it for a shorter period of six months, families in which both parents gave up work would be faced with a cut of nearly £400 per week on average — on top of the income they already forgo from the mother taking time off. It shows the Tories are not living in the real world that families live in,” he said.

The Tory leader announced the first in a series of policy announcements on the family before the Conservatives’ spring conference in Newcastle upon Tyne, which starts today.

Mr Cameron allowed ITN cameras to film him at home with his family in preparation for today’s announcement. He was pictured at breakfast time with his wife, Samantha, and three children, Ivan, Nancy and Elwen.

He was shown playing with his children and asking them which cereals they wanted. His wife, who is interviewed rarely, spoke of how regimented the family needed to be to get out of the house on time.

Mr Cameron’s decision to give access to his family is in contrast to the practice that has been followed by Gordon Brown, although Tony Blair was pictured regularly with his wife Cherie and their four children.

Asked whether he thought that it would be controversial, Mr Cameron said that “people want to know what you are like and what makes you tick — that is modern politics. People want to know a bit about your life. That is natural.”

He added it was important that voters did not think that politicians were a breed apart.

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