John Redwood’s Economic Competitiveness report, published on Friday, called for the abolition of IHT on primary residences and although Shadow Chancellor George Osborne did not commit to any of the policies, he suggested there will be movement on IHT.
Osborne said there is a “powerful case” for axing IHT on primary residences and that such a move could be paid for through green taxes- a principle that will be expanded in the coming weeks with the publication of the Party’s Quality of Life report.
In a speech at the event Osborne said: “Inheritance tax was originally designed to target the very rich. But these days the very rich avoid it by hiring expensive tax advisers. It is an increasing number of ordinary homeowners who are now hit by inheritance tax and that is unfair. So I will be looking very carefully at any proposals to ease the burden of this tax on these families.”
The sentiment echoes calls from the Tories Independent Tax Commission, led by Michael Forsyth, which reported last autumn and called for IHT to be axed.
The LibDems have called for a major hike in IHT levels, to around £500,000, coupled with a crackdown on the “loopholes” used by some to escape the tax and former ministers such as Stephen Byers have called for it to be scrapped as a way of appealing to “Middle England”.
The Government has raised the threshold to £300,000, will raise it again to £350,000 by 2010, and has predictably attacked Redwood’s proposals.
Statistics can be trotted out to support all sides in this argument with Chancellor Alastair Darling saying that only 6 per cent of estates pay IHT, although Scottish Widow’s research suggests that up to 40 per cent of estates could be liable in the future.
Labour has been quick to savage Redwood’s proposals with Darling touring the TV and radio studios to brand the report evidence of a lurch to the right that would inevitably lead to public spending cuts.
However, they will be more than a bit embarrassed by Chief Secretary to the Treasury Andy Burnham’s TV performance where he attacked the report, listed the potential implications for tax-payers, before admitting that he had not read it.
Other highlights of Redwood’s report are calls for a greater emphasis on caveat emptor, a new regulatory court for complainants and a consumer disclaimer to provide more clarity on the responsibilities of high-risk investors.
The report also calls for changes to the pensions environment. As well as familiar suggestions for an end to forced annuitisation and a new flexible lifetime savings account the group proposes a restructuring of final salary schemes to halt their decline.
It suggests future pension contracts should specify a range of benefits that are guaranteed and agreed between the employee and employer, calls for changes to pensions legislation to avoid current distortions and suggests attempts are made to change the accounting standards it says have created too much volatility in company balance sheets.
David Cameron and George Osborne will be picking and choosing from this set of policies, in tandem with those from the other five policy groups, and Osborne has declared the direction of travel of the Party with regards economic policy even if it is too early, and perhaps politically unwise, to make specific proposals now.