By Mark Wallace, TaxPayers' Alliance Campaign Director
When Ken Clarke joined the Shadow Cabinet he suggested that the Conservative Party's flagship pledge to cut Inheritance Tax was now an aspiration, now Neil O’Brien of Policy Exchange makes the case that the pledge should be dropped in the Daily Telegraph today. Neil argues – correctly – that the Tories must prove to the public that they appreciate how tough times are, and demonstrate their willingness to be bold and even controversial in order to balance the books at the Treasury. However, his conclusion that abandoning the pledge to all but abolish Inheritance Tax is the way to do that is deeply flawed.
George Osborne struck the right note at the start of the week when he began explaining to the public that some very difficult decisions need to be made in coming years, both as a product of the recession and of Gordon Brown’s irresponsible and wasteful borrowing binge. As well as being factually correct, this is politically the right tack to take, too – the public know things are bad and they will respect politicians who come clean with them and are brave enough to take really tough decisions.
Is it really a brave or tough decision to tax people more, though? The answer is no. Gordon Brown has demonstrated in the last 12 years beyond any doubt exactly how easy it is for a politician to slap the public time and again with higher taxes, whilst posturing as a generous leader by lavishing money on public spending. The public are sick of it. What would be really radical, and truly brave, would be to look at the other side of the equation and cut spending. What’s more, once the plunge was taken it would be popular and productive.
By comparison, abandoning the promised cut in Inheritance Tax would be deeply unpopular, and – as Andrew Lilico of Policy Exchange pointed out earlier in the week – a drop in the ocean of national debt, even if the government have pre-empted the Conservatives and already put new taxes on non-doms. Worse, it would send the message that we are not all in this crisis together after all, and that taxpayers will be the lead whipping boys once again. George Osborne’s mantra for good times was that the taxpayers came second to the public sector in terms of allocating the proceeds of growth. It would be deeply unfair to give taxpayers first place in the queue only when it comes to reaping the pain of recession.
Scrapping the pledge would not be the brave, new thinking that the people are looking for, it would simply be a continuation of Gordon Brown’s one-sided view of the public finances. Neil seems to have mistaken a simply unpopular idea for a brave one. People do want brave thinking – but the mark of a brave idea is that whilst it may be controversial to begin with, it eventually wins through and is appreciated as having been the right thing to do. That will never be the case if the Conservatives decide to keep the hated Death Tax alive.
George Osborne is right to offer honesty on the state of the public finances, but that must mean honesty on spending, particularly on the big, structural costs that place a stranglehold on the public finances such as public sector pensions. These are the areas which the public know need reform, but are taboos in Gordon Brown’s Downing Street. The public have had quite enough of the reality of Gordon Brown’s high taxes – what they need to hear more about is the alternatives that the Prime Minister ignores. Dropping the IHT promise is simply more of the same, whereas cutting public spending and reforming the bloated public sector would be a breath of fresh air. If it is a matter of signalling that the Conservatives are not the party of the rich, stopping the practice of paying wealthy people benefits, as Reform have proposed, would be a far better way forward.
If the Conservatives were to drop the Inheritance Tax pledge, that would not be the start of an honest discussion about what is needed to rebalance the public finances, it would be the start of a desperate rearguard action in which the Tories would have to explain why they thought the tax had suddenly become worthwhile. That would lose votes without gaining very much money at all, which is hardly a good deal.
There are tough decisions ahead, and to get them through will need a strong mandate and substantial public support, particularly if the unions take mass strike action. Any Government that wants to succeed must get the public on-side. That cannot be done if the public sector is protected from pain while taxpayers’ suffering continues to increase.
