Tories to slash inheritance tax

Michael Howard is planning to relieve hundreds of thousands of families of the burden of inheritance tax if the Conservatives win the next election, The Daily Telegraph has learned.

The party also hopes to cut stamp duty to help home-buyers and is examining how to cut indirect taxes such as fuel duty.

The tax-cutting plans, described as firm "targets" rather than promises, will be unveiled in a "mission statement" at next month's party conference in Bournemouth.

Mr Howard hopes the statement, which will argue the "economic and moral case" for tax cuts, will boost Tory support among middle-class voters who deserted to Labour in the 1997 and 2001 elections.

Oliver Letwin, the shadow chancellor, last night made clear his determination to lift the threat of inheritance tax.

It is paid at 40 per cent on net estate above £263,000 and soaring property prices mean almost a million more families are liable to inheritance tax than in 2002.

One radical option being discussed within the party is raising the threshold to £1 million.

Mr Letwin said: "Inheritance tax has become plain unfair. Once only the very rich paid it but under Gordon Brown it is hitting ordinary families all over Britain.

"Two and a half million houses with six million people living in them are potentially liable to inheritance tax and the number is rising rapidly.

"Even former council houses are being drawn into the net. This problem needs to be remedied."

Agreement on the tax package follows a battle in shadow cabinet about the extent to which pledges to cut tax should be at the heart of Conservative election strategy.

The tax document falls short of the original demands of some frontbenchers, including Liam Fox, the party co-chairman, who wanted a more sweeping commitment tying the party to a reduction in the overall tax take.

Lord Saatchi, the other chairman, floated the idea of raising the tax-free threshold for income tax, arguing that it would benefit the poor. Party insiders said the more radical approach, involving income tax, was ruled out after Mr Howard and Mr Letwin said more time was needed to assess the level of Government borrowing closer to the election.

They want to see how much can be saved from a Tory audit of government waste being carried out by the City troubleshooter David James.

The leadership has also been influenced by research over the summer showing most voters did not believe the Tories would cut taxes even if they promised to do so.

Voters were concerned that public services, including schools and hospitals, would suffer if a Conservative government reduced the overall level of taxation.

By targeting particular, unpopular taxes, the Tories hope to address voters' specific grievances, rather than giving the impression of being wedded to a tax-reduction philosophy that is seen as an echo of the Thatcher years.

Australia, New Zealand and Canada abolished theirs years ago and in America there are plans to phase out all federal estate duties by 2010, although individual states levy their own taxes.

The sum raised by inheritance tax last year was £2.504 billion in a total tax take of £155.5 billion. Receipts from stamp duty were £7.45 billion.

Some shadow cabinet members argue for stamp duty thresholds to be "smoothed out" to make the tax more "progressive". Many Tories say the thresholds should be raised because of the rapid increase in house prices.

At present those buying a house costing less than £60,000 pay no stamp duty. It is paid at one per cent of the purchase price on properties between £60,000 and £250,000, three per cent on homes between £250,000 and £500,000 and four per cent above £500,000.

A Tory frontbencher said: "The aim is to show we wish to bring down the tax burden. But the polling shows we have to be careful how we explain the case. Michael has been influenced by polling evidence."

Tony Blair will use next week's Labour conference to set out a third-term agenda aimed at making life better for "hardworking families".

Initiatives on jobs and skills, crime and housing, child care and public services will be unveiled, as he claims Labour is "back on the front foot".

At last, the Tories get serious about cutting tax
(Filed: 24/09/2004)

The Conservatives are giving the strongest possible indication that they are now serious about proposing tax cuts in time for the next general election. The party leadership is preparing a position paper to present to its conference next month which, as well as reiterating the moral and economic case for lower taxation, will suggest concrete examples of taxes that might be eliminated or reduced. Notable targets on this hit list are to be inheritance tax and stamp duty on property, both peculiarly well chosen from an ethical and a political point of view.

Inheritance tax is an invidious penalty on family devotion, personal responsibility and thrift. It taxes wealth that has already been taxed once as earnings (and possibly again as income on investment) and it now falls on almost anyone who owns an ordinary suburban home in a prosperous part of the country. Stamp duty on property is a tax on mobility, both geographical and social, and hits those who must, for any reason, move home. The Tories are right to see that attacking these particular taxes would have more resonance with voters than a widely cast promise to lower the overall tax burden.

This newspaper has maintained that only by promising lower taxes could Michael Howard and his shadow chancellor, Oliver Letwin, make their case for smaller government credible and consistent. They have put forward eloquent arguments for reducing the role of the state and its hugely inefficient bureaucratic machine, but have stopped short, before now, of any commitment to tax-cutting. For all Mr Letwin's protestations that such promises might be rash, given the impossibility of predicting the economic future, this reluctance to carry their own philosophy to its logical conclusion had begun to look like a failure of nerve.

The very logic of their critique of government policy seemed to founder on the Tories' ambivalence over tax-cutting. If Gordon Brown was, as the Conservatives claimed, a spendthrift Chancellor, and Labour really had increased the taxes of every British family by such large proportions, then surely it should have been possible to name one tax that could be reduced. Even those in the party who wish to emphasise its commitment to reforming health and education, rather than a desire to cut tax, should understand that the coherence of the Conservative case for better services relies on a belief in leaner, more efficient government - and that must entail taking less tax.

http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2004/09/24/dl2401.xml&sSheet=/opinion/2004/09/24/ixopinion.html

"...and in America there are plans to phase out all federal estate duties by 2010..."

In an ideal world, I'd believe this would be 100% possible. It is my fervent hope for the end of 2004, that we gain seats in the Senate and the House, George W. wins in Nov., and the democrats are revealed to all non-thinking people to be 'of the gov't and by the gov't', so this insidious inheritance tax can be permanently eliminated just like Uday,Qusay(and soon to join them in hell)Mr. Saddam Hussein.

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