Fraser Nelson: "The Inheritance Tax "reduction" is a canard. Anyone with financial acumen (or a lawyer) will not benefit at all. KPMG have just been on the phone explaining it all to me and explain it here. “This change, although likely to grab headlines, is in practice only giving to most people what they already have,” says Carolyn Steppler, its tax director. Why? At present, couples can take out a zero-rate Discretionary Trust which in practise pools their inheritance tax allowances. Only those who have not availed themselves of this would be helped by today’s announcement. Yet Brown estimates this will cost him £1.4 billion – I suspect this figure is designed to shrink rapidly. Is it impossible for this government to give a Budget without trying to fool the media in one way or another? Old habits die hard."
Ben Brogan: "Not just the clothes, but the wardrobe as well. Gordon Brown has stolen so many Tory wheezes that George Osborne's office takes over the mantle of "Labour's favourite think tank". That said, George might need to get himself a new manifesto. The Treasury's calculation is that 8,991,000 of the 9million households helped by the Tory proposal to raise the IHT threshhold to £1m also benefit under Mr Brown's alternative: just 9000 estates come in between £700,000 and £1m. On top of that the Government has used its power to act by implementing it as of today, made it retrospective for 3m widows, and sent out a message about the economic advantages of marriage."
John Redwood: "The government has also announced an 18% Capital Gains Tax rate. This is good news and bad news. It is good news for those making gains that would otherwise have paid tax at 40%, but bad news for people and businesses making long term gains where they were paying 10% after taper relief.The overall impact of the measure means they plan to raise more money from capital gains tax, but the headline rate is better for the UK than 40%."
Matt Sinclair: "Did you hear Alistair Darling announce that he would be increasing defence spending to look after the armed forces working so hard and risking so much on our behalf? It's true in nominal terms, it's true in real terms, it doesn't appear to be true in terms of a percentage of GDP. With a huge commitment in Afghanistan and new global threats the share of our GDP we spend on the armed forces is still in decline. The relevant numbers can be seen in Table 1.3 and Table B3: 2007-08: £32.6 billion / £1,404 billion = 2.32%. 2010-11: £36.9 billion / £1,630 billion = 2.26%. In strategic terms we are still trying to increase the size of the Cold War dividend. Unless we expect big efficiency savings this isn't sensible behaviour for a nation with big foreign commitments and underequipped armed forces."
Andrew Haldenby, Reform: "This year's Review is even more biased towards higher spending without reform than those of previous years. If the problems of the NHS and state schools were to be solved by an extra £2 billion, they would have been solved many years ago. The high spending approach will not deliver the more realistic levels of taxation and high quality education which are the prerequisites for success in the coming decade."
Tim - this is why I said attacks on Gordon Brown's character were justified. I remember you were worried about Chris Grayling calling him a liar.
Well after today we know he is a lair and the thief. but more it shows Gordon Brown will stop at nothing to stay in number 10.
He will copy any -*any*- policy we have that is popular and use the government as a round the year campaigning machine.
The wrong man indeed ! We must be focused on removing him from office.
I wonder how long it will be before Labour party members come to the same conclusion ?
Posted by: Man in a Shed | October 09, 2007 at 19:14
Fraser Nelson is spot on. The Conservatives have missed a completely open goal. Rather than pointing out the inherent duplicity in Labour's position (ie that Darling has not increased the amount couples can pass on free of tax by a single penny) Osborne chose to enirely erroneously to claim that Labour had stolen his clothes. What a massive waste of an opportunity to expose the deceit at the heart of this government.
Posted by: RH | October 09, 2007 at 20:09
The removal of taper relief will hit many people hard. An accountant friend of mine says this "On the face of it this is a massive and open (ie not stealth for once) tax hike on vast numbers of small business and private people. To wipe out accrued indexation and taper relief on 6 April is monstrous - amounts to retrospective taxation."
Posted by: donald Collier | October 09, 2007 at 22:48
Possibility one: there has been no substantial difference in the IHT since this announcement, as it doesn't change the options for most people - in which case this is all spin. Possibility two: there has been a substantial difference in the IHT since this announcement - in which case, they followed us, having had no intention of doing this before we did. Under the former, they are spinning. Under the latter, they are bereft of ideas and following our lead. To repeat the best known lines of once fairly well known song, GORDON IS A MORON.
Posted by: Happy Tory | October 09, 2007 at 23:03
Throughly agree with RH and Fraser Nelson. Nil rate discretionary trusts were probably the best known and most widely used tax loophole in the country.
In terms of taxable estate on death it makes not one iota of difference. Osborne by his wrongly aimed criticism has actually given Labour credability on this.
As said above this will not cost Brown £1.4bn - I am sure that figure could be ripped apart with some research.
As for Darling letting this allowance be used retrospectively, this already occured - In tax inefficient wills: providing all beneficiaries agree a will can be altered (and so made more tax efficient ie use a nil rate discretionary trust). So absolutely no difference in substance whatsever.
Posted by: Accountant | October 09, 2007 at 23:15
Accountant - exactly and when they suddenly discover that there are more than a handful of non-doms they will then have more money and will claim prudence in 18 months time when they slash borrowing needs. It is so obvious you can see it coming a mile off. Cynical? You bet!
Posted by: James Burdett | October 09, 2007 at 23:37
Accountant: I agree. Since the exercise is a complete spoof, I can't see it actually costing £1 billion. What I can't work out is why they're overcounting the cost.
The Annex to the Pre Budget Report makes it clear that Darling's "simplified", "competitive", "internationally low" 18% CGT rate is actually a revenue-raising measure by about £350 million - but then that seems low. The 2007 Tax Ready Reckoner isn't out yet (surprise me) but the 2006 version estimated the cost of taper relief to be £4.7 billion so there's clearly a hell of a lot of money sloshing around here.
Is it simply that they're taking a "prudent" approach so that next March in the full Budget they can declare better than expected revenues and knock something off income tax? Or, as James Burdett suggests, better-than-expected borrowing figures (we've made a lot of running about worse borrowing outcomes; I wouldn't put it past them to set us up for a fall next year).
Posted by: William Norton | October 10, 2007 at 00:33
"To wipe out accrued indexation and taper relief on 6 April is monstrous"
Wow - I hadn't got it that accrued indexation is wiped out too. The taper relief wipe-out is compensated for by the 18% rate for normal portfolio investment. But ending accrued indexation is effectively a large cut in the CGT tax free band for longer term investors. It is too arcane a point to get much political traction, but it is somewhat outrageous; I know some trusts which have indexation back to the 1980s until 1998. No wonder the CGT changes will be revenue raising.
On the other hand, it is a massive simplification. That should free up the Accountants from doing CGT computations so they can wholeheartedly concentrate on the old fashioned business, now to be revived, of turning income into capital gains.
Posted by: Londoner | October 10, 2007 at 00:48
"I can't see it actually costing £1 billion. What I can't work out is why they're overcounting the cost." - William Norton.
Possibly because if you say "we are cutting taxes and by the way its not going to cost the government a penny in lost revenue", most people would realise you are either lying or its not a tax cut?
Posted by: Anon | October 10, 2007 at 08:15
Londoner: welcome to the wacky world of tax "simplification". From April when you sell any investments you'll be paying tax on inflation.
Posted by: William Norton | October 10, 2007 at 10:30
Perhaps now a little late but I have just read the hmrc supplementary on the CGT proposals. Very very bad for individuals with investment assets indeed. As William Norton said we are now paying tax on inflation. I couldn't believe he would wipe out indexation and taper relief prior to April 2008 but he has.
Someone holding an asset from 5th April 1982 has absolutely no allowance for inflation whatsoever. People selling businesses on retirement are going to be particularly stuffed and anyone who has held an asset for more than a few years is going to be worse off.
Posted by: Anon | October 12, 2007 at 08:23