There’s only one answer to the Tory betrayal on inheritance tax

 Forget fiddling around with thresholds and allowances – be far bolder and abolish the cruel death duty

Source - Daily Telegraph - 27/09/23

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In the dog days of summer 2007, a junior Tory party apparatchik penned a highly sensitive email to a senior colleague and pressed “send”. At the time, Gordon Brown was 10 points ahead in the polls, prompting fevered speculation of a snap election. Addressed to one “Hancock M”, the confidential message outlined all the Conservative Party’s best ideas, including a policy the party leadership hoped would be the big bazooka: a huge cut to inheritance tax. 

Unfortunately for the young aide, there were two “Hancock Ms” in Parliament at that time. Instead of going to shadow chancellor George Osborne’s then special adviser Matthew Hancock, the email landed in the inbox of a Lib Dem MP with the same surname but very different politics. 

For 48 hours, everyone at Tory party HQ sweated it out, wondering whether their carefully laid plans to unveil the vote-winning new policy at the annual party conference would be spectacularly derailed. Much to their relief, the MP for Portsmouth South failed to spot his sneak preview of the Opposition’s plans. 

A few days later, Osborne announced that the Tories would raise the threshold at which inheritance tax is paid to £1 million – and changed the course of political history. There was such a surge in support for the Conservatives that Brown panicked, and scrapped an election he might very well have won. As for the flagship inheritance tax policy? It lasted no longer than a birthday balloon. As soon as it had served its purpose – attracting a blaze of positive publicity – Osborne and Cameron effectively killed it, eventually introducing a fiddly new allowance for the family home that failed to deliver on the initial promise. 

Almost exactly 16 years later, the Tories are once again putting it about that they might cut inheritance tax. Apparently, reforms are “being discussed at the highest level”. Good grief! Does Rishi Sunak think we are all suffering from collective amnesia? How can the Prime Minister, his Chancellor, or any other leading Conservative make any such a suggestion with a straight face? 

After all, the party has spent its entire time in government not only failing to cut death duties as promised, but making the charges very much heavier. In today’s money, that £1 million pledge would now be worth around £1.7 million. In every single Budget since 2010, Conservative chancellors have failed to raise the £325,000 threshold at which the tax is paid on the value of estates. Adjusted for inflation since 2007, that threshold should now stand around £550,000. 

At first, the excuse for this betrayal was reasonable: the strictures of coalition government with the Lib Dems. Amid the shock of the failure to win an outright majority in 2010, Cameron and Osborne had to be pragmatic. Nick Clegg’s party would never have signed up to such a tax cut. In the horse trading that followed the hung parliament, Cameron and Osborne jettisoned it as casually as a cigarette butt. 

So far from apologising to Tory voters and reiterating their commitment to the principle of reduction, they then acted as if the original policy was an embarrassment, going out of their way to make it more difficult for families to reduce the bill. Osborne’s austerity agenda, framed as sacrifices to be borne by everyone, made any measures that could be portrayed as “tax cuts for the rich” politically awkward. This was their way of showing that those with the broadest shoulders were carrying a heavier load. 

In 2015, this excuse fell away. Cameron won an outright majority and was on the crest of a wave. Yet in another kick in the teeth to voters, successive Tory chancellors did almost nothing. And so we are where we are today, with the miserly threshold frozen until 2028. According to Treasury estimates, between now and then, another 50,000 more families will be dragged in. 

As all those who have been clobbered by this pernicious tax know, it is a shocking assault on the bereaved, forcing people at their most sad and vulnerable to spend weeks compiling inventories of possessions, drafting in valuers, and dealing with endless petty questions about trinkets. With just six months to pay up and heavy penalties for late filing, they barely have time to lay loved ones to rest before calling in the strangers with their clipboards and calculators. 

The paperwork is monstrous and utterly spirit-sapping. By the time the nitpickers and bureaucrats have totted it all up, there is often only one way to pay: by selling the deceased’s home. At the stroke of an HMRC pen, the fruits of a lifetime of love and labour is diverted to a profligate and ungrateful state. No wonder the levy is so bitterly resented. 

And what does all this agonising effort yield? A measly £7 billion a year for the Exchequer – around the same amount as the Government wasted on out-of-date PPE. 

Instead of insulting voters with half-hearted anonymous briefings about possible reforms some day, Sunak should show his party’s promises are worth more than the paper they are written on. Forget fiddling around with thresholds and allowances, which will only perpetuate the pointless paperwork and grief. Far bolder and smarter just to abolish it.