Sunday, August 20, 2006

Will Byers defect to the Tories?

Stephen Byers has written about inheritance tax in the Sunday Telegraph [free registration required – but see also here]:

“Increasingly, it hits people who in life have never been liable to the higher rate of income tax but in death find their assets taxed at 40 per cent.”

Quite astonishing that people whose incomes suddenly increase dramatically should pay a higher rate of tax on them.

“It is a penalty on hard work, thrift and enterprise.”

Income tax might be described in such ways; IHT is a tax on outliving one’s parents. And I don’t think tax rates are going to be much of a disincentive to doing so.

“For these reasons, inheritance tax should be abolished.”

Note that last word: abolished. It’s not that the rate should be reduced, nor that the lower threshold should be raised; the whole tax should be abolished. And nowhere in his article does he show signs of knowing that IHT affects a mere 6% of UK estates.

For discussions of the policy proposal, see Tom Hamilton and Chris Dillow. I want to look at the politics of it briefly.

If Byers is trying to strengthen the chances of an ultra-Blairite challenger to Gordon Brown for the party leadership, such a challenge will fail. If he’s trying to push Brown in this direction in order to head off such a challenge, he will also fail. Byers lacks any power to make the weather inside Labour – partly because of his poor record as a minister, and partly because, when he endorses Tory cut-taxes-for-the-rich ideas such as this, he makes the rest of us wonder why exactly he’s in the Labour Party.

Perhaps, though, he’s just trying to prepare the ground so that a defection, come Brown’s leadership, won’t look utterly opportunistic.

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