1. Spend ten years in government ignoring a much hated tax;
2. Listen carefully to Tory policy proposals;
3. Wait for opinion polls to support those proposals;
4. Present a watered down version in your next economic statement, ensuring that it sounds better than it really is;
5. Sit back and wait for the voters to kick you out.
12 comments:
Alas... so true.
I too was exasperated by the darling boy’s announcement on inheritance tax, not because of petty, short-term wrangling about who has stolen whose clothes – although this is in itself dispiriting – and not simply because it indicates a government in panic throwing ridiculous policies at an electorate who probably won’t be electing anyone for a good couple of years yet. My frustration stems instead from the knee-jerk sledgehammer the Chancellor has taken to a tax which is fundamentally fair, economically beneficial and socially advantageous.
George Osborne has cited inheritance tax as damaging to the aspirations of individuals. This is an assertion it is difficult to reconcile with either logic or common sense. Aspirations put one in mind of meritocracies, and inheritance tax could only be described as an instrument of a meritocratic state; too often the aspirations of wealthy children extend only to living off, and eventually inheriting, parental wealth. Inheritance tax is currently one of few concessions to the minority of Britons who value merit and ability over deferential privilege.
Inheritance tax is good for the economy. It encourages a degree of spending, stimulating economic activity and improving economic liquidity. It replenishes the housing stock – every parental home sold by adult children to meet an inheritance tax bill is another home available for sale rather than rent – and so helps to control the house price inflation which has done so much to widen the gap between rich and poor in this country.
This aids society, increasing social mobility and giving a slight chance for the young to get on the housing ladder. It encourages donations to charities, as these are exempt (whilst unfortunately I admit, encouraging donations to political parties, which are also exempt).
You claim that we deal here with a “much hated” tax. If this analysis is correct, the hatred is itself odd, for currently only eight per cent of estates end up paying any inheritance tax at all, and for the vast majority of those the amount of tax involved is small. Why so much hatred for a tax which will impact so few people?
Perhaps the reason people hate it is that they are aspirants after all, but what they aspire to is the being in a position to pay inheritance tax; of being able to pass the wealth they have accrued to their children, to ease their lives after working so hard in their own. This chimes with the normal Tory argument on the matter, but it certainly doesn’t chime with fact. 47 million Britons do not have a will of any kind, a shocking statistic for a nation we are to believe is obsessed with jealously guarding and passing on its individual wealth.
Perhaps in reality people do not really hate it at all. Perhaps the seismic shift in the polls is a result of the instinctive “hatred” the Thatcherised masses have of all taxation, the kind of hatred that resolves itself into indifference (the same indifference that leads to the dearth of wills) once a little subconscious consideration is given to what taxation is for. The Tories did the best out of a bad situation, managing to scare Brown into stalling an election which would have crushed them and given them five more years of glorious but truly pathetic in-fighting. However, they’ll not build an election victory out of briefly populist promises on a tax which in reality effects very few people, most of whom (as Martin Salter noted in parliament) would have voted Tory anyway.
Gosh, what a long debut post on your blog for me. Just had some free time on my hands this evening – a prior engagement was unexpectedly cancelled.
Long, but very readable and, some might add, it does correct an almost imperceptible right-wing bias on this blog!
How very frustrating that you had an engagement cancelled - let us hope the guilty party plies you with drinks on their bill next time you meet up. Meantime, I must return to the still uncompleted Oxbridge references...they've ruined what could have been a very entertaining evening....
There is nothing wrong with right wing bias because it is certainly better that being a liberal who have 'ideas' that no one cares about or even worse, a Labour bias!
"inheritance tax could only be described as an instrument of a meritocratic state"
Is it fair that some children have a greater advantage in life because they have inherited wealth in the forms of property, bonds etc. from their parents? No, but is it fair that some children have a greater advantage in life because they have inherited wealth in the form of talents from their parents? No. In a truly meritocratic society should we therefore only give lessons in running to those who haven't inherited the ability to run fast!
What is the distinction between using your money to buy your child a good education or leaving him property to provide him with an income? Why should people be taxed a 2nd time, when instead of spending their money on luxurious living, they choose to save their money to better the lives of their children. Inheritance tax has no role in any free society.
Fair? Where does fair come into it? Meritocracies simply ensure that the skills, abilities and talents available to the economy (and to society) are utilized to the best possible degree.
“What is the distinction between using your money to buy your child a good education or leaving him property to provide him with an income?”
I’m tempted to say there isn’t one, and then harp on for a while about the abolition of private education. In the interests of not sounding too much of a Trot, I’ll ask you to consider the distinction in terms of the wider economy. In the former case the child is being prepared to use their talents to the full, whilst in the latter is encouraged in laziness.
“Why should people be taxed a 2nd time”
Why shouldn’t they? We already have plenty of double taxation in this country. I’m taxed on my income, and then when I spend my income I pay tax again in the form of VAT.
Further, there are many situations in which inheritance tax functions as a capital gains tax, and taxes elements of the estate which have not been previously taxed. For the majority of death estates, the principal asset is the private residence of the deceased. The absurd house price inflation we have seen recently has left many people with a huge uncrystallised gain; inheritance tax taxes this. It isn’t a tax on something the person has worked their whole life to obtain, and it isn’t a double tax.
“There is nothing wrong with right wing bias because it is certainly better that being a liberal who have 'ideas' that no one cares about or even worse, a Labour bias!”
Giles – the school is still selective, isn’t it?
Consultant, glad to see your august university has done nothing to remove the bite from your opinions!
Braaaaaaaaaap!
It seems to me that you penalise people who have wealth passed on to them and not those who have talents and abilities passed on because people using their talents benefits society. Please explain to me how redistributing through government taxation and preventing wealth being passed on is beneficial to society? In your first comment you even went so far as to erroneously claim that inheritance tax is economically beneficial socially advantageous. Please let me take this chance to inform you that it is neither, and with the upmost certainty I can say that abolishing inheritance tax would be both economically and socially advantageous.
Yes I stand corrected when you say inheritance tax isn't a 2nd tax. You are quite right when you say it is an extra tax imposed after many others, as oppose to one imposed after an intial tax. Though sadly I don't understand how this supports the continuation of inheritance tax. I also can't help but question that increasing house prices have given people "huge uncrystallised gain". If property investment guaranteed uncrystallised gain equal to or higher than the expected gain from capital invested in other areas then believe me, capital wouldn't be invested in any other market.
Exactly, inheritance tax is just another tax and surely it could be done without. Furthermore, in response to the fact that people are already taxed on their income and then with VAT and that they should be taxed again, why? Surely this means that they have already payed tax on all of the money that is then taken once they are dead. But this time thay have not just earnt this or purchased something, they just wish to pass it on to their family. This should mean that it is absurd to claim inheritance tax because nothing has been done to warrant it being taken.
"Please let me take this chance to inform you that it is neither, and with the upmost certainty I can say that abolishing inheritance tax would be both economically and socially advantageous."
Silly me! I understand entirely now.
Well that is good to know!
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