Monday, December 14, 2009

Inheritance tax cuts: it’s what they really, really want

Some people have wondered why the Tories refuse to abandon their promise to raise the inheritance tax threshold to £1 million.

It was stunningly popular when announced back in 2007, being instrumental in talking Gordon Brown out of a snap election. It was the most significant opposition policy announcement in many years. But times have changed a lot: the middle classes are less inclined to identify with the rich (bloody bankers); the Tories are coming under fire for being the party of wealth and privilege (especially on this one issue); and the public finances are not exactly conducive to tax cuts.

And yet, rather than dropping it, George Osborne is still insisting he intends to do it, although not straight away:

It’s now clear that if you want to get on in life, save for your retirement and leave something for your children then the Labour Party is not for you. But it won’t be in the first couple of years.

Why stick to this line despite the transformed public mood?

A possible answer could be inferred from an anecdote that Andrew Grice reports:

A Tory mole tells me that Mr Cameron has received about 4,000 letters of protest over dropping his "cast-iron guarantee" that a Tory government would hold a referendum on the EU's Treaty of Lisbon. … The issue for many correspondents was not Europe but trust, a promise broken. I suspect we won't hear Mr Cameron use the phrase "cast-iron guarantee" again.

Tory policies have been notoriously few and vague. Cameron and Osborne may fear that ditching this one – by far the best-known of their specific proposals – would be more damaging than any hits they may take from keeping it. U-turns can be executed gracefully, but a high-profile one such as this might have compounded many people’s suspicions that Cameron and gang don’t really stand for anything, and are just bog-standard politicians who’ll say whatever’s convenient for them at the time. This is all the more important given that the expenses scandal has subjected the political class to even more distrust than before.

That’s what occurred to me when I read Grice. But then I remembered something else.

Ken Clarke was publicly slapped down for suggesting the inheritance tax cut might be downgraded from a “commitment” to an “aspiration” – all the way back in March. This was before the Tory attack of the vapours over the Lisbon referendum made them fear looking wobbly; it was before the expenses scandal made political integrity into the issue of the year.

I can only conclude that Cameron and Osborne want to cut inheritance tax because it’s something they truly, madly, deeply believe in. You may agree or disagree, but there it is: this is the social injustice that they’re in politics to fight.


Liam Murray said...

This was spoiled by a cheap line at the end.

Policy isn't always about changing things; sometimes it's just about saying what's right and wrong and - provided the impact of holding to that isn't too detrimental to society - policy need do no more than deliniate those right / wrong boundaries.

For many Tories (& independents like me) IHT is inherently wrong - it's a claim on what one generation passes to the next and something government should have no business doing. It doesn't matter what the money could be used for or how much the target has elsewhere - it's just a liberty thing.

It's perfectly possible to support this move (or the abolition of IHT altogether) and be as deeply committed to social justice as anyone else.

Tom Freeman said...

Even if I believed that taxing inherited wealth were less legitimate than taxing earned income, I would rank it perhaps millionth in my list of social issues to address. This would be true even if there were no deficit: the 'victims' of this 'injustice' are not exactly society's neediest.

But what I do believe is that most parents pay no IHT at all, and the few that do still get to leave most of their assets to their children, while the minority share of a large estate helps in part towards the education etc. of the remaining 99.99999% of the next generation.

(Specifically on the last line of my post: If you believe that IHT is an utterly atrocious intrusion into the relationship between parents and children, and that its abolition is a priority outweighing matters of economic inequality or revenue-raising, then you're free to read the line in that spirit. But of course you know where I stand so you scented implicit disdain.)

John B said...

I thought this was made thoroughly delightful by the cheap line at the end, FWIW.

Also worth noting that if you're a Tory donor, you're likely to be in the socioeconomic bracket that either has to pay IHT or sets up trusts to dodge it. One gets what one pays for...

Liam Murray said...

I think I'm being clumsy in making my point (as usual).

My point is that for some things the outcome is secondary to the principle. If we banned second cars then only the (relatively) wealthy would suffer and the environment would gain - but nobody seriously advocates it as policy just because the outcomes are good.

Anonymous said...

'nobody seriously advocates it as policy just because the outcomes are good'
Seems a good reason to me.....