There was a time when the topic of inheritance tax was relevant only to policymakers and those fortunate few who were wealthy enough to be affected by it. But things have changed drastically in the past 40 years.
An entire generation of Britons raised on council estates began, in the 1980s, to embark on an adventure their parents could never have contemplated: home ownership. Decades later, these hard-working grafters are now considering another exercise that their own parents could never have contemplated: working out how much of a cut the government will take of their estate before their children can benefit from it.
This sort of dynamic fundamentally alters the nature of the debate. Inheritance tax is increasingly affecting ordinary, lower middle class families, especially in the South East. Many of them will be Labour voters who believe in equality and the greater good. But clearly, the party has not yet caught up with this reality.
In the 1990s, one article in a Left-leaning magazine made the case for a 100 per cent rate of inheritance tax. Being gifted money earned by other people was immoral, the writer suggested, and the wealth gap between rich and poor could only be closed by the state taking everything your mum and dad left you.
It’s a debate that has haunted the Labour movement ever since. In 2007 it even led to Gordon Brown bottling the early general election he was planning to hold in order to take advantage of his honeymoon period as the recently installed prime minister. A promise by George Osborne to his party’s conference that, as chancellor, he would scrap inheritance tax altogether, persuaded Brown not to seek his own mandate after all. In other words, he feared that such an offer might prove irresistible to voters.
As with too many issues, some Labour thinkers see the argument over inheritance tax not as an economic one , but as a moral one. Supporting the confiscation by the government of a large proportion of a dead relative’s property is considered virtuous by those who, even today, regard private wealth as distasteful. But to want to leave your children as much wealth as possible is not remotely immoral; it is a fundamental, shared instinct that stretches back as far as humanity itself.
And that instinct is as vital among the “new” middle classes as it has always been among the wealthy. Moreover, when a new generation of young people are finding it increasingly difficult to emulate the achievement of their parents by buying a home, political parties should be wary about placing any more obstacles in their way. Indeed, these are two groups – the new middle class and the young – that Keir Starmer, desperate to move from the hard-Left ideological tendencies of Corbyn and co, claims to stand for. If their interests are his, he would have to think again about the old “death tax”.
Those who point the finger at the super-wealthy and claim that their privilege is somehow an argument for state seizure of assets simply aren’t paying attention. Instead of focusing on those wealthy enough to afford the best accountants to advise on how to minimise their tax liabilities, policy-makers should focus on the broader experience of the public. Many of us scrimped and saved when we were younger so that we could buy a house and then keep it in frequently hazardous economic environments, through family dramas and recessions. There was no other option open to us: none of us knew that “the bank of mum and dad” even existed.
Brought up in social housing in an era when there was no stigma attached to that, we inherited nothing from our own parents and had to start out on the property ladder with no help other than what we could persuade our bank managers to lend us. We will never forget the anxiety attached to the shiny new mortgage we committed to in our 20s, with monthly repayments that were eye-wateringly high and subject to rocketing base rate rises.
We opted to do without many of life’s luxuries in order to keep a roof over our families’ heads. Foreign holidays, new cars and visits to restaurants were all sacrifices. It was just something you had to do in order to own a house. One day, in the far-off future, it would all be worth it. Our mortgages would finally be paid off and late middle age could slow down to a more relaxed pace, in the knowledge that our years of hard work and self-denial would allow our own offspring to avoid at least some of the hard graft we had to endure.
So a rapidly growing number of people will soon be asking: what on earth has the government to do with any of this? They may conclude, rightly, that there is nothing moral about inheritance tax, nothing virtuous about depriving a family of what is rightfully theirs.
Tax working people by all means, but politicians, including those in the Labour Party, should recognise that once that income has been taxed, they have no moral right to take another slice of the cake after death.
