Our present Chancellor follows a long line of predecessors who have spent their time in office talking big but in action have simply tinkered at the edges. I feel a sense of déjà vu when I hear and read comments coming out of Downing Street about the forthcoming Autumn Statement. Over the last few months we have heard talk about abolition of Inheritance tax. However, as the days tick down to the statement, the elephant of abolition has been reduced to the mouse of a possible reduction in IHT rates.
There are many well-rehearsed arguments as to the unfairness of inherited wealth and many rather dubious ones as to why the taxman should have a right to a substantial percentage of your property at death. Most estates are small, and those with very large estates will find ways of avoiding the tax altogether by, for example, retiring overseas. On the whole, the bulk of estates paying IHT are not big from a historical perspective, but include modest (if overpriced) property. As an undercapitalised country it is essential that saving and wealth building is encouraged rather than discouraged through taxes of this sort.
IHT is an iniquitous tax in that it seeks to take away a percentage of the wealth accumulated during a lifetime of work and saving that has already been subjected to all sorts of different taxes and Government levies along the way. It is also an incredibly inefficient tax; not only in the assessment and collection, but in the costs incurred by those who seek to find legitimate ways of mitigating it for the benefit of their heirs. There is also a distortive effect within the economy due to the purchase and retention of exempt assets; exempt for good reason, but nonetheless used by some simply as shelters from IHT.
Reduction in IHT is not going to budge the numbers in the polls in the way that abolition would. What we all object to about this tax is the fact that no sooner has our loved one breathed his or her last, the taxman is banging on the door looking to see if he is due a cut. It is this that really hurts, and then to add insult to injury, the taxman invariably drags his feet over granting probate, even to estates that have been found to be below the IHT threshold.
Abolition would lift a collective burden and anxiety from families across the land. It would remove much of the stickiness in asset transfers between the generations, leading to better utilisation of them. It would also remove the enormous present inefficiencies created in IHT planning involving discretionary trusts and all sorts of other protections should these perhaps be required at the time of death. Abolition of a tax that raises trivial amounts of money whilst instilling anxiety and resentment in a large percentage of the population would not only be a very popular move but would indirectly improve economic productivity.
Sadly, the Prime Minister and his Chancellor are both ex Head Boys of their respective schools, and that role tends to breed caution and pragmatism. So no Big Bangs from them just more tinkering at the edges; more pages added to the tax code, no long term vision, just Blah, Blah, Blah!
What have we done to deserve a government so lacking in ambition, so lacking in ideas and innovation and so frightened by its own shadow? In 2019 we did not vote to be ruled by Davosman, all consensus and steady as she goes, we voted for action to see the massive potential of this country realised. Time is rapidly running out for those in power to rediscover this purpose; I am however, not holding my breath!
Alastair MacMillan runs White House Products Ltd, a manufacturer, distributor and exporter of hydraulic components to over 100 countries. He is a supporter of the Jobs Foundation.
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