There is an opportunity that could win Rishi Sunak the next election

2023-05-10

STEPHEN GLOVER: There is a heaven-sent opportunity that could win Rishi Sunak the next election in one bound…

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What is the one thing Rishi Sunak could do above all that would boost the Tories’ chances of winning the next election?

Stopping the small boats bringing illegal migrants across the Channel? That would be significant, but I doubt whether by itself it would swing the election for the Conservatives. Besides, I’ll be surprised if the Government pulls it off.

Halving inflation this year? That would be a good step forward, but such an achievement will be matched by every other advanced country.

In fact, most of them are making more rapid progress than the UK.

These two pledges are among the five undertakings by which the Prime Minister says he wants to be judged. The other three — cutting NHS waiting lists, increasing economic growth and decreasing the national debt — would be important achievements.

What is the one thing Rishi Sunak could do above all that would boost the Tories’ chances of winning the next election?

Stopping the small boats bringing illegal migrants across the Channel? Halving inflation this year? These two pledges are among the five undertakings by which the Prime Minister says he wants to be judged

Privileged

But could any of them prove to be knock-out blows, if accomplished? Would they cause voters to take another look at the Tories and say, well, they’re not so bad after all, so we’d better give them another go? I rather doubt it.

There is however one policy that would be likely to transform the Conservatives’ prospects. I mean the abolition of inheritance tax (IHT), or at the very least raising by a significant amount the threshold at which it becomes payable.

You might think that such a move would only reinforce the impression that the Tories are the party of the rich and privileged, and consequently backfire. In which case, I respectfully submit you would be wrong.

Many people, very possibly a majority, favour higher taxes for the very rich, according to successive polls. But they have entirely different feelings about inheritance tax, even if they aren’t among the five per cent currently forced to pay it — obviously a small minority.

Dislike of IHT is widespread even amongst those who don’t pay it. Perhaps they can imagine having to do so. Or maybe they simply think it grossly unfair that the Government should snaffle a chunk of anyone’s hard-earned, and already taxed, money when they die.

Cast your mind back to the 2007 Tory Party conference. For a brief and never-to-be-repeated moment, shadow chancellor George Osborne was a national hero. He promised to raise the limit at which IHT is paid from the then threshold of £300,000 to £1 million for an individual, and so ‘take the family home out of tax’.

One instant poll found that 62 per cent of respondents approved of Mr Osborne’s plan. Tory fortunes soared. Gordon Brown, the Labour prime minister, was so rattled that he decided to call off the general election he had been contemplating.

In the event, Mr Osborne’s £1 million threshold has never seen the light of day because the Lib Dems, who went into coalition with the Tories in 2010, scuppered it.

Today the individual threshold stands at only £325,000, though it can rise to £500,000 if you give away your home to your children or grandchildren. Once the threshold is breached, the Government nabs 40 per cent.

Given that the cost of living has gone up by more than 50 per cent since 2007, the threshold is much more onerous than it was when Mr Osborne made that speech. Last November Jeremy Hunt froze it until 2028.

As a result, largely because of the seemingly inexorable growth in the value of houses, an increasing number of estates will be liable to IHT in the coming years — unless Messrs Sunak and Hunt have second thoughts.

If they do — and there have been reports that the Prime Minister is reflecting on the matter — the public reaction would be overwhelmingly positive. A YouGov poll last October suggested that 63 per cent of people support raising the £325,000 threshold, with only 21 per cent against.

An amazing 48 per cent of respondents wanted to abolish inheritance tax altogether, with 37 per cent opposed. Even among the sometimes disgruntled young, there was strong support for raising the existing threshold, with 49 per cent of the 18-24 age group in favour, and 27 per cent against.

In short, if the Government were to put up the threshold by a significant amount, a majority of the public would almost certainly approve, while abolishing IHT altogether would probably also be a popular measure.

In either event, Labour would struggle to represent the Conservatives as favouring the rich. I expect Sir Keir Starmer would cavil a bit, probably by suggesting that the Government was being distracted from more important issues. But Mr Sunak would have public opinion on his side.

With one bound, he and his party would be, if not exactly free, then at any rate closer to winning the next election — and for once in a blue moon they would have tasted success by introducing a genuinely Tory measure.

Disparities

What are the arguments against? There aren’t many. It’s true that abolishing IHT altogether would leave a £7 billion hole in government finances, though that is less than 1 per cent of all public spending. The hidebound Treasury would oppose abolition, and doubtless influence the naturally cautious Jeremy Hunt.

Another contrary argument, at least against outright abolition, is that it might serve to entrench wealth in families, and therefore widen disparities between the rich and the poor.

The trouble with this line of thinking is that it wrongly assumes that the very rich pay inheritance tax as things stand. They often don’t. In fact, for them IHT is essentially a voluntary tax.

The super-rich employ expensive accountants, who offer schemes for buying agricultural land, usually exempt from inheritance tax. They are also advised to set up trusts or to transfer assets to their children, which don’t attract IHT if the arrangement is done seven years or more before death.

It is the middling people who are caught out by inheritance tax, and will be in ever-growing numbers unless the Government acts. They commonly have few assets other than the house they live in, but this one possession, which has probably taken a lifetime to create, can make them liable to a punitive tax.

Strivers

Getting rid of IHT is not a wacky scheme beloved of extreme governments. Countries that have no inheritance tax include Australia, New Zealand, Canada, Portugal and Israel. Even traditionally Left-leaning Sweden and Norway have followed suit. Why not us?

Rishi Sunak is a very rich man. I’ve obviously no idea what perfectly legal arrangements he and his wife may have made (or propose to make) to obviate, or at least reduce, the burden of inheritance tax when their time comes.

All I hope is that he’ll show he’s on the side of the strivers and toilers who don’t employ ingenious accountants — people who risk having to hand over hard-earned assets to HMG which they should be allowed to pass on to their children, or bequeath to whatever cause they wish.

It’s not every day a political leader is able to do something that is both electorally advantageous and morally right. Here is an issue that matters to voters as much as the PM’s five pledges, and which he can be sure to deliver.

What a heaven-sent opportunity! Will Rishi Sunak have the gumption to grasp it?

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