Chancellor of the Exchequer, Conservative MP Jeremy Hunt, has retracted his proposal to slash inheritance tax after facing opposition from party members.
Hunt addressed the House of Commons on November 22 with his Autumn Statement, proposing a crackdown on benefit frauds, a 10% cut to National Insurance, a 6.7% increase in universal credit and “other benefits”, and an 8.5% increase to state pensions. The statement, however, did not set out changes to inheritance tax.
Hunt had set out to cut unemployment benefits to help slash inheritance tax, which would, according to economists, lead to a £3bn spending cut for means-tested households or those receiving disability benefits.
A person, who inherits an estate over £325,000, pays 40% inheritance tax, which leaves him with £190,000. According to the Times, the proposed options were to reduce the tax by 50%, 30%, or 20%.
Speaking in an interview in Milton Keynes published by Sky News on November 18, Hunt said: “One thing I want to be very clear about: there is no easy way to reduce the tax burden; what we need to is to take difficult decisions to reform the welfare state.”
“When it comes to tax, we will not do anything that compromises the battle against inflation. We have succeeded this week in halving inflation compared to when I became Chancellor of the Exchequer and Rishi Sunak became Prime Minister. That is the single most important thing we have done and we will not do anything to jeopardise the process.”
He told the Telegraph: "The big message on tax cuts is there is a path to reducing the tax burden and a Conservative government will take that path."
The silence on inheritance tax reform comes after several MPs took issued with the proposed cuts in light of the country’s current economic state. According to a report published by The Guardian, MPs had welcomed proposed tax cuts, but believed that more needs to be done currently to help the welfare of families and businesses.
Chair of the Northern Research Group of Tory MPs, John Stevenson, told the news outlet: “I am all for reforming tax and inheritance tax needs reforming. However, at this time any tax cuts should be aimed at helping businesses or the lower paid.”
He told The Independent that: “Inheritance tax may be in need of reform, but it’s a distraction right now – far more important is reducing taxes for people on low incomes and businesses. That’s what will drive the economy forward.”
The MP for Stoke-on-Trent North, Jonathan Gullis, agreed that the inheritance tax should be “eventually abolished,” but cutting the tax threshold and the rate of income tax should be the country’s priority.
“Instead, we should be looking at cutting the basic rate of income tax [and] increasing the 40p tax threshold to help families really feeling the pinch.”
Torsten Bell, chief executive of the economic think-tank Resolution Foundation, suggested in a post on X, formerly Twitter, that priority needs to be given to reducing income tax:
“Gentle reminder you can currently inherit almost 4 average priced homes tax free (£1m value). That’s worth more than an entire lifetime of full-time work on the minimum wage (£917k) which (obviously) we very much do tax.”
“Even if you think lower inheritances taxes are desirable, are they more desirable than not whacking up taxes on income quite so much?”
Former Chancellor of the Exchequer, Lord Kenneth Clarke said, in an interview with Times Radio, that the financial state of the country does not warrant the cutting of inheritance tax: “Well, it’s not the tax cut I would choose. Indeed, I’m not sure he’s got any room for tax cuts.”
“And choosing inheritance tax at the present time might appeal to the Conservative right, but it leaves them open to the most appalling criticisms when inflation and the state of affairs is making poorer people in this country very vulnerable indeed, giving tax relief to those families that are lucky enough to have members of it with capital above the limit through inheritance tax and pay any significant amount of tax on the inheritance. And I’m not sure that the economic and financial state of the country justifies it.”
Speaking to the BBC, Hunt mentioned that tax cuts could be possible if the economy does well: “The best way that we can reduce the tax burden for everyone is to grow the economy."
Hunt, in his interview with the Telegraph, said that this was “absolutely” the time for UK economic growth: “This is the moment. We’ve got to go for it as a country and I think we’ve got a big, big opportunity.”
“Without pre-empting the decisions that the prime minister and I make, this is an autumn statement for growth. It’s a turning point for the economy,” He added.
Hunt, according to the Financial Times, had set out to “improve productivity” by helping businesses. He went on to suggest extending the government’s business tax break scheme: “We recognise that having competitive business taxes is an important way to grow the economy.”
Hunt also told the BBC that he hopes to invest £2bn in the automotive industry to improve the zero-emission standards in vehicles: "I would love to have a Tesla factory in the UK anytime. Let's be clear, that is a fantastic company"
"I spoke to Elon Musk about this and he said it's not about the support. It's about the environment. And he loves London because there's so much tech going on and Tesla is essentially a tech company, so let's see what happens."
