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Nic Cicutti: Tory IHT move appeals to voters’ naked self-interest

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This may surprise one or two readers of Money Marketing, but I have never voted in a general election.

We are not talking here about a Russell Brand-style rejection of all political parties, nor is this the result of apathy on my part. It is simply that my Italian passport precludes me from voting.

That said, like the overwhelming majority of people in this country who already belong to one of the main electoral tribes, I already know how I would vote were I given the opportunity to do so. It is the “undecideds” who really matter.

Which means the parties’ manifestos and electoral promises are not aimed at those who want to arrive at a considered decision about what is best for the country, having carefully costed the alternatives. It is more about marking out territory, telling your own tribe and those closest to it about your overall philosophy on day-to-day “big issues”.

It in this context we should examine the Conservatives’ pledge this week to raise the inheritance tax allowance up to £1m for married couples. This would be achieved introducing a £175,000 family home exemption into an individual’s current £325,000 nil-rate band.

David Cameron told the Sunday Times that IHT “is a tax that is meant to be paid for by the rich, not by hard-working families who have saved to buy a home and improve it. That wish to pass something on is about the most human and natural instinct there is.” Hence the Conservatives’ pledge to exempt some homes from inheritance tax.

It is all nonsense, of course. As the Financial Times pointed out, only 16,000 estates paid any IHT in the 2012/13 tax year, the last for which figures are available. Most estimates suggest barely 20,000 to 30,000 estates a year would be affected by these proposals in the foreseeable future.

Not only that, but the measure, costed at £1bn, would be paid for by reducing tax relief on pension contributions. The Conservatives propose to cap relief on incomes between £150,000 and £210,000 from £40,000 to £10,000.

In effect, better-off savers would end up funding the children of those with very large estates – a bizarre set of priorities.

So what lies behind the Conservatives’ wheeze this week? Last year, after the pre-Budget statement, I mentioned that unlike Gordon Brown, one of his predecessors in office, “George Osborne is a highly political Chancellor.

“The difference between both men, however, is the latter appreciates personal finance issues and how they can resonate with the public mood far better than his former Labour counterpart ever did.”

Understanding this simple fact helps explain not just why the Conservatives have made this pledge a key manifesto issue but also why David Cameron pitched it the way he did.

This is about setting out “values” that chime with a generation of people like my dad, who in the years before he died was obsessed about leaving us his house and a small pot of savings, to the point where he denied himself medical treatment – and even new clothes – which would have made his life more comfortable in old age.

The reality is, as the FT also pointed out, under these plans somebody inheriting a £1m house would pay no inheritance tax. Meanwhile, “someone earning £100,000 a year for 10 years — the same total amount — would pay over £290,000 in income tax alone at current rates and thresholds.”

Essentially, the Tories are proposing to give £1bn a year to a tiny number who have done nothing to earn the privilege, while continuing to levy income on tax a far higher number of people who work hard for a living – or those who want to save for their retirement.

The key question, of course, is that of whether this will work electorally for David Cameron and his party.

What the Tories are clearly hoping to achieve is a repeat of 2007, when George Osborne’s pledge to raise the inheritance tax limit to £1m panicked Labour into calling off plans for a general election it could potentially have won. By limping on until 2010, Gordon Brown cost his party the chance of another term in office.

Can Osborne pull off the same trick a second time? Over the last 12 months, the Chancellor has focussed on two key groups he hopes will help his party ride back into Number 10: pensioners and homeowners.

The pension changes of the past year were one part of the process, while reforms to the way stamp duty land tax is levied are another. IHT is the third component of a financial Holy Trinity considered so crucial to Tory election hopes.

Except that I am not sure the effect will be so successful this time round. True, Labour are notoriously cack-handed on personal finance issues, as I have long argued.

But we are in the middle of a general election, where winning votes by harking back to a value held by people like dad, of leaving something behind for the children, can be matched more easily by another set of principles, such as “fairness” or even, amazingly for Labour, of “fiscal responsibility”.

Like the brilliantined spiv in Dad’s Army, the Tories are trying to seduce voters by appealing to their naked self-interest. It won’t work – at least not this time.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. The main reason that Labour lost the last general election was nothing to do with them calling off plans for it. Rather, it was the unholy mess Brown had made of the economy and I don’t think Balls would be much better. You can’t make the poor wealthy by making the wealthy poor.

  2. Nic
    The last thing I thought I would accuse you of is being naïve. All parties pander to voter’s naked self-interest – that’s what our politics are all about. None of them are any more upstanding or honest than the other. That’s why I have only voted about 4 times in my life.
    1st for Ted Heath as I wanted us to join the EU
    2nd In the Euro referendum (yes – to stay)
    3 For Thatcher 1st time– as I was thoroughly sick of the power of the Unions (I well recall the chaos of Callaghan’s last years)
    4. To keep out Kinnock who I thought was entirely unsuitable and at least Major seemed a decent bloke.

    For my part – very little to do with self-interest as I together with a whole lot of others in ‘the middle’ know full well that whoever is in – we gat zapped.

  3. Is this really a forum for such an overt, politically biased (dare I say ‘naked’), diatribe? Perhaps it might be more relevant if it was balanced with some comment on the announcements from other parties that equally pander to such self-interest.

    Of far greater relevance and seriousness is whether Nic would be allowed to stay if UKIP win… I may have to re-consider my voting intentions!

  4. Nic, we all know that all political parties appeal to certain ‘tribes’ but to accuse the Conservative party of appealing to naked self interest where the others don’t is laughable.
    During the last 5 year coalition government, conservatives, who pledged to raise IHT to 1 mill in 2010 if they were elected on their own, have not been allowed to raise the limit due to their coalition partners, however have managed to start to get the public finances in control, unraveling Brown’s ‘client state’ project that sought to make the majority of the population reliant on state handouts.
    So Milliband is appealing to those who are on benefits to vote for him with lots of promises to enlarge the client state again. Welsh and Scottish Nats seem to be Trots in comparison and the Greens are even more economically challenged.
    Poor Clegg seems to want to become a moderator and Farage wants out of Europe, but still drink Stella.
    Since 1997, the last time we won the (Eurovision Song Contest), Labour cynically allowed mass European immigration to boost its client base, realizing, rightfully, that the UK born youth could not be bothered to vote for anyone unless they were on Big Brother so they needed some other voters.
    The next thing they successfully did was to drive wages down by introducing the ‘Minimum Wage’ regulations that provided a good excuse for a drive to the bottom in pay, given that the rush of immigration empowered employers to chose the cheapest workers, legally.
    The rise in foodbank use is one of the things that the last government has been criticized for, however the vast majority of users are those who have been ‘sanctioned’ for not obeying the state benefit rules or are ‘overstayers’ who are what we used to call illegal immigrants. It shows that by giving some ‘tough love’ we as a society can still manage to provide some help.
    So every party appeals to potential votors by showing them ‘whats in it for you’, the only human emotion that is universal.
    However with all parties appealing to hard workers, I would like to know who is appealing to me, a not so very hard worker!
    But the bigger question is: if Milliband/SNP win, will we win Eurovision this year.

  5. Nic,

    Your political leanings are pretty obvious. May I suggest a good book – “The Road to Serfdom” by F A Hayek. It might just change your thinking!

    Dick Carne

  6. A mostly interesting article with a bizarre conclusion. The Tories “naked self-interest” can be “easily matched” by the principles of “fairness”? “Fairness” in politics is a meaningless term, a dog-whistle. Any Year 7 debater can argue persuasively that it is “fair” to avoid levying IHT on the middle-classes and equally persuasively that it is “fair” not to cut taxes for those who are relatively comfortably off in the current climate. Anything can be described as “fair”, which means that it is a useless word. “Fair” is whatever your chosen political tribe tells you it is.

    It is also odd to describe a cut in IHT as appealing to “naked self-interest”. Some may benefit from the cut in IHT when their parents leave them money but that is not who the Tories are appealing to. As Nic acknowledges, it is the dads, mums and grandparents that the Tories are appealing to, those who aspire to leave something to their heirs. (We know this for two reasons, other than that even Nic admits it: 1) a cut in the tax you’ll pay on a future inheritance is not a vote-winner, it’s too intangible 2) the grandparents vote, their future heirs don’t.) And by definition, this is not self-interest.

    Unless we are arguing that selfishly choosing to care for some people and not others on the grounds that they are your family or friends falls under “self-interest”, but if that is what Nic is doing he is even more of a socialist than I thought.

  7. The thing about inheritances is they are not compulsory. Mr Cicutti, along with evry other UK beneficiary, is/was quite at liberty to pass on any legacy to those he believed more deserving – and that includes leaving it to the government as an additional revenue receipt.

    In terms of ‘self interest’ my pinko peer group, all in their 50’s, kind of stopped talking about wealth inequalities as their parents have been dying off. At the most I’ve seen legacies split with the children, I’ve seen none refuse the money.

    Naked self interest, your words not mine.

  8. Nic

    I think you may recall a quote by the person who thought up IHT (instead of Estate Duty). If you remember it was Roy Jenkins (a pretty competent Labour Chancellor – a real rarity).
    He said “IHT is a tax on those who trust the Government more than their family”.

    Like CGT in many cases IHT is a voluntary tax. It is not that hard to avoid it – or at the very least mitigate it severely.

    Whether it is fair or liked or not, it is generally true that the richer you are the less (as a percentage of gross income) you pay. Perhaps not as an employee, but as your own boss it’s pretty well universal.
    Anyway the naked self-interest is probably keenly felt by most MPs if they were honest enough to admit it. I wonder what arrangements the two Ed’s have in place? After all Primrose Hill properties are worth a fair bit! As they saying goes ‘There are plenty of Gucci Socialists’.

  9. Call my Nieve…. I didn’t know that an Italian passport stopped your from voting in the UK if you lived in the UK…… I thought if you were an EU national you voted where you were resident? Am I wrong?
    As to Nic’s strident support for Labour. The irony for me is that my mates in the army thought I was a bit of a lefty, while my daughter thinks I am a fascist, my gay friends think I am a liberal and my Christian friends think I am a Christian.
    The one thing I am, is a human being with different priorities, which change as the political and social environment changes and hence my voting changes as Political parties of both the left, right , middle and up and down make the mistake of NOT listening to what their potential voters think, explaining and educating them if they believe they are wrong (over more than just a month or two) and then re-presenting the views and asking to be elected on it.
    Personally I really don’t know who I am going to vote for, but I will vote as I will then take the blame if the party I vote for gets in and makes a mess of it and complain like billion of the party I don’t vote for gets in and makes a mess of things (well more of a mess than anyone else would have made as none of them can get everything right, but like with financial advice, voting should be about prioritising and all thru the cold war, for me voting was made easy, while from 1988 onwards, voting became a lot more difficult, more so after GW1 and even more post 9/11)

  10. Philip Spierling 16th April 2015 at 8:02 pm

    And that was a party political broadcast by , The Socialist, Rostov tractor, glorious five year plan, siege of Stalingrad , Moscow dynamo back four , if you work hard and earn a few quid we think its ours to spend and we know what’s good for you , Party

  11. Nic gives the game away with his crack about a tax cut meaning that the Government is giving something. Giving is not the same as not taking. And the cross subsidy argument is ludicrous, as it can be applied to any tax or benefit change. So we can guess who Nic supports, on the quiet.

    The IHT proposal is as barmy as the mansion tax. All three main parties are guilty of messing about with the tax system so much and so often that no-one outside the priesthood has the faintest idea now how pensions work.

    As for naked self interest. Gordon Brown was the king of that particular appeal with his expansion of the benefits system, which we couldn’t afford then and can’t afford now. I’d vote for a party that told the truth about the economy.

    There isn’t one.

  12. @ Graeme Laws

    ” I’d vote for a party that told the truth about the economy.”

    Exactly my view.

  13. Thought Labour hated non-doms!

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