Stephen Byers wrote an article attacking inheritance tax for the Sunday Telegraph this week. Byrers, you might recall is one of Tony Blairs' Cabinet failures, but is still close to No. 10. He brought out all the usual wrong arguments on Inheritance Tax that the right love, such as it being double taxation. I won't repeat why he's wrong here - I've already done so.
Pollu Toynbee wrote an excellent response to Byers for the Guardian. I recommend it. I once had little time for Polly Toynbee, which was when we worked together. I have to say these days she's really on form.
But the most interesting thing is the response of Chris Wales to Toynbee's article, published as a letter in the Guardian. Wales (who I know) is, in his own words 'Former member, Treasury council of economic advisers; adviser to Gordon Brown on tax policy 1997-2003'. For the record, he's also a former Andersen's partner, is rather proud of his doctorate, which is actually in mediaeval history, and was when last I heard, seeking employment. But it's his closeness to Brown that is important. He says:
The reality is that it is a low-yielding tax ..... makes no political or economic sense.
He adds:
The tax system works best when it goes with the grain of the economy. Inheritance tax doesn't. There is no doubt that it will be abolished.
And continues:
There is a strong case for a broad review and public debate about the taxation of capital and inheritance tax should be considered as part of that process.
Let's be clear. This is from the man who already reduced capital gains tax to 10% in most cases, and put tax on pension funds to compensate - his two big achievements, both of which shifted the burden of tax onto the less well off. And this is from a man who has told me he is convinced the UK must have a 15% corporation tax rate. And who now wants no inheritance tax.
Do you see my drift? Brown's favoured tax adviser for more than 6 years was intent on ensuring the tax burden on the well off was reduced and that on ordinary people was increased. Which, by the way, is exactly what Byers' favoured reform of Inheritance tax would also do since he would levy environmental taxes on all as an alternative to Inheritance Tax on the very few who have the means to pay (always, since it's almost always charged on the dead, and they have no further use for cash).
Does Brown's choice of adviser tell us a lot about the man? I admit I rumbled Wales the first time I met him (and he, I think likewise, me). Nothing has ever convinced me of the coherence of his thinking, let alone his proclaimed Labour credentials. His latest comments do not increase my confidence.
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I’m in favour of inheritance tax, and certainly believe that those who wish to abolish it need to point out which taxes they would raise to gain the same amount of revenue.
However, we do live in a political environment, one in which a few people paying a tax can kick up a stink disproportionate to the effect on others (think truckers and the tax on petrol, or farmers and most taxes), and politicians will think is the relatively small amount of tax raised worth it for the political noise it engengers?
It is up to the rest of us to point out the purpose of this tax, and why it is good for society that such a tax exists, even if it could be improved in some ways.
However, I see no reason why, as the letter yuo quoted suggests, that there should be a properly informed debate on this and other taxes. Would it, for example, be better to tax the recipient rather than the estate – so that an estate widely spread isn’t taxed as highly as one left for a single recipient?
Richard
I entirely agree with you that a review of Inheritance Tax may well be appropriate. But Chris Wales somewhat shoots himself in the foot by saying it should be abolished before suggesting the review.
Reviews are one thing; whitewashing exercises for a decision already taken are something quite different.
I do, by the way, think a recipient based tax of the type you suggest makes a lot of sense, not least because it would require annual declaration of wealth movements ona tax return. But can you imagine the ‘fun’ that would cause?
Richard
IHT is a mine field, I want to put a different spin on this, as you know Richard I don’t agree with IHT, but, if taxes were not wasted and our taxes used for the greater good and not political fancies of the moment then surely people would not be as opposed to paying tax?
Leaving aside the merits, or not, of IHT, I find it strange that the comments of Mr Byers have provoked so much comment. The man is an intellectual lightweight with, fatally for a politician, a complete absence of charisma.
For those supporters of IHT, I say that to have your views criticised by Mr Byers is analagous to being savaged by a dead sheep.
IHT is a joke from a moral point of view. On what basis does any government feel they have the right to 2/5ths of a persons gross value after their death, when their whole lives they have payed tax on everything else, leaving their estate as the accumalation of their lifes work after tax ?
To then have that taxed again is just plain wrong.
Hit motorists again, apply larger road taxes on a means-based sliding scale and possibly factor in mileage too.
What would you rather, work your whole life only to have nearly half your savings taken away, or be taxed relative to the amount of damage your lifestyle inflicts on the planet ?
Attitudes need to change on a grander scale than merely one issue.
[…] Stephen Byers has responded to Polly Toynbee’s article in the Guardian newspaper in which she attacked his plan to abolish inheritance tax, on which I have already commented. And he comes up with a classic argument for abolishing inheritance tax. He says: […]