Scrapping IHT is an easy win for the Tories
Ditching the nation’s most immoral tax could offer the party a lifeline. They’d be foolish not to grab it
Here’s a question that won’t make it into the big fat quizzes of the year: when was the last time a Conservative minister looked to the horizon and articulated their beliefs, beyond “competence” and “aspiration”?
These are important qualities. But Rishi Sunak has steadied the ship about as well as the captain of the Titanic, and over the past year, his vision for the country has involved little more than urging us to accept ever-shrinking household budgets in order to fund an ever-expanding state.
Where pockets of prosperity do open up, suspicion, levies and regulation typically soon follow. Consider, for instance, the Government’s recent treatment of the oil and gas industry, or supermarkets.
Taxes will amount to around 37 per cent of national income – a level not sustained in the post-war period – by the time of the next general election. Red tape is stifling entrepreneurialism, our slavish devotion to the NHS is killing the economy, welfare spending is spiralling, with mass migration used to cover it up. Some 13 years of Tory rule has left societal decay and economic disintegration in its wake.
No wonder the Chancellor is said to be contemplating a Spring Budget tax-cutting bonanza. The Tories may be trailing in the polls, but they can still avoid a shattering defeat of 1997 proportions. Sunak can open clear blue water with a Labour Party whose “Green Prosperity Plan” has just been diluted to embarrassingly thin gruel, and which appears desperate to duck tough decisions on tax and spend.
Once again, abolishing inheritance tax (IHT) is said to be on the cards. There are reasons to be sceptical: it wasn’t included in the King’s Speech, it may not get through Parliament in time for the next election, and a Labour government would presumably reverse the decision on day one. Scrapping the levy would elicit obloquy from the usual suspects, the ones who view tax cuts as “giveaways” and delight in pillorying the Prime Minister as “out of touch”.
But it could shore up some votes that would otherwise be lost. The “death tax” is deeply unpopular, and this loathing will only intensify as frozen thresholds and soaring property prices conspire to force middle-class families into paying the levy simply because they own a home.
It will take more than promises to deliver these votes, however. Despite grand pledges from Cameron and Osborne to raise the inheritance tax threshold to £1million, it has remained frozen at £325,000 since 2009. The last Labour government raised it every year. If the Tories want to capitalise on a cut, it will need to be implemented as soon as possible.
It has long been presumed that Britons misunderstood IHT; that they rejected it, believing everyone – rather than a small minority – would have to pay posthumously. But in a development that indicates the public takes a more reasonable view of taxation than most politicians, polling has recently shown that, even when voters have the threshold explained to them, they still remain opposed. There is a strong feeling that what is earned and taxed in life should not be taxed again in death. That parents should be able to help out their children with whatever is left after funding their own social care (another catastrophe that the Tories have failed to resolve).
The UK has an unusually high rate of IHT, at 40 per cent, yet it brings in just £7billion each year – less than 1 per cent of government revenues. Given the levy reduces saving, abolishing it could increase investment, cushioning the blow to the Treasury.
One reason why the Conservative Party has been in government for roughly two-thirds of the past century is its ruthlessness in defenestrating unpopular leaders. But it has already pulled at that ripcord twice since Boris Johnson was elected with an 80-seat majority in 2019. It has no choice but to head into the next election with a bold, clear vision – one that will get Tory voters to the polling booth when they might otherwise stay home.
The Sunak administration cannot reasonably be described as “Conservative”, if we take this to mean favouring free markets, striving for lower taxes, and displaying scepticism about the role of the state. Instead, it is taking its lead from Scandinavian social democracies – yet even Sweden and Norway have abolished inheritance taxes since the turn of the century.
IHT is anti-family and antiprosperity. Insofar as the Tories have a guiding philosophy, this surely isn’t it.