So says ex-Cabinet Minister Stephen Byers in a Sunday newspaper article. It was a proposal that made a few headlines in the quiet August holiday season.
Such a move would demonstrate to middle-class Labour voters they hadn’t been forgotten, he says. An interesting about-turn from this former Transport Minister who’s bludgeoning attitude to Railtrack shareholders whilst in office showed no such consideration. How many middle-class Labour voters were amongst the derided “grannies” foolish enough to hold the doomed rail company’s shares, I wonder?
Still this Blair ally succeeded in winding up the Treasury and perhaps that was the point. They duly responded that inheritance tax is “fair and necessary”, amounts to the valuable equivalent of 1p on income tax and only affects the top 6% of estates.
If nothing else, Byers certainly proved himself an astute politician. The shadow of inheritance tax stretches ever longer over the nation’s ageing population of homeowners. Gradually more and more people are coming to the uncomfortable realisation that this may actually impact them.
More get caught in inheritance tax trap
Figures from HBOS estimate 1.5m properties in the UK are worth more than £285,000 today. This could increase to 4.2m properties by 2020 they say if the exemption increases only with inflation. The tax continues to bring in more each year with the most recent total coming in at £3.6bn this year up from £2.9bn last year. It could reach as much as £5.5bn by 2020 according to HBOS.
Clearly a once elitist tax is becoming ever more populist in its reach. It may only affect the top tier today but with the individual exemption at £285,000, it doesn’t take a mansion in the shires to cross the threshold. A decent two bed flat in London should do it.
Politicians do well to note the trend. There’s political capital to be made here and Byers has certainly exploited it. Though we should perhaps give some limited credit to the inflation-busting exemption increases pencilled in for 07/08 and 08/09 coming in at 5% and 8% respectively. This is modest help given booming property prices but, barring a slump, will not make the issue go away.
Who’d have thought a member of a party once famed for its hard line “soak the rich” attitude would propose such an idea...
Rob Mackrill Managing Editor,
Finance Confidential
P.S. If you enjoyed this article then we encourage you to sign up for the free Fleet Street Daily eletter. Learn what you can expect from today's markets -- and how to prosper in the face of uncertainty. You won't find more thought provoking writing anywhere on the Internet.