The fact that Cameron wants to cut inheritance tax when half a million people required emergency food aid last year says a lot about where his priorities lie.
David Cameron has suggested that the Tories might raise the inheritance tax threshold if they win the next election.
When asked about an unfulfilled 2007 Tory pledge to raise the threshold at which the tax is payable from £325,000 to £1m, Cameron said that the Conservatives would look at the issue in their manifesto for the 2015 election.
“Would I like to go further in future? Yes, I would. I believe in people being able to pass money down through the generations and pass things on to their children. I think you build a stronger society,” he said in a speech today.
“Inheritance tax should only be paid for by the rich. It shouldn’t be paid for by people who have worked hard and saved, and bought a family house in, say, Peacehaven [a town near Brighton]. So the ambition is still there and I would like to go further. It’s better than it was, but it didn’t make it into the coalition agreement. It’s something we will have to address in our manifesto,” he added.
The key phrase is this: “Inheritance tax should only be paid by the rich.” Key because it presumes that those currently paying inheritance tax are ‘merely’ middle class.
But is this really the case?
Certainly many of those paying inheritance tax are not ‘rich’; but nor are they the ‘squeezed middle which so many politicians enjoy talking about.
Just 6 per cent of those who die every year pay inheritance tax, and the average taxpaying estate is worth £875,000, according to HMRC. Inheritance tax also raises £2.6bn a year for the Treasury from some of the wealthiest people in the country, while estates worth less than £325,000 don’t pay a penny.
It’s certainly true that people who have seen the price of their house skyrocket in the last decade or so will begrudge the fact that they have to pay inheritance tax, but let’s put this into some kind of perspective: if you own any kind of ‘estate’ in the current climate you should count yourself as extremely lucky.
Taxing unearned income (unearned by the person on the receiving end of it) is also surely a fairer way of raising revenue for the exchequer than taxing income from work. Any raising of the inheritance tax threshold will also mean that money has to be found elsewhere. As George Eaton has pointed out, this could leave a black hole in the country’s finances.
At a time of rising inequality, redistributive policies such as inheritance tax are a relatively fair way of raising money; certainly fairer than punitive measures aimed at the most vulnerable such as the bedroom tax.
The fact that Cameron’s instinct is to pander to the 6 per cent who own some of the biggest estates in Britain, at a time when half a million people required emergency food aid in the six months to December, says a lot about where the PM’s priorities lie.
James Bloodworth is the editor of Left Foot Forward. Follow him on Twitter
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