Saturday 1 May 2010

So who started the inheritance tax bidding war?

A number of well known liberal voices wrote to The Guardian this week to argue for the Lib Dems as the party of progress in British politics. The Lib Dems make strong arguments on civil liberties and political reform. Yet the endorsement exercise engaged in the usual pretence that the LibDems can claim an ethical superiority in every area that might affect the progressive conscience.

So Demos Director Richard Reeves, who seems to have coordinated the exercise, suggested in his accompanying article that for some of the Lib Dem backers he helped to assemble, their “moment of conversion” was:

...Clegg and Vince Cable's refusal to enter the bidding war between the other two parties on cuts to their inheritance tax.

Really? That is to rewrite political history. In fact, it was the Lib Dems who began that bidding war, proposing to increase the inheritance tax threshold to £500,000 in July 2007, three months before George Osborne raised the bidding to £1 million (subsequently achieving a government capitulation, in making the £325,000 threshold transferable for married couples).

So the LibDems were ahead of the game in calling for a significant cut in inheritance tax. Why? At the time, it was thought it would be a very useful argument to make in their south-west marginal seats where they are fighting the Conservatives.

So here's my riposte in today's Guardian letters page:

It is surprising for Richard Reeves to claim that many of his Liberal Democrat endorsers were persuaded by the party's "refusal to enter the bidding war between the other two parties on cuts to inheritance tax" (Letters, 29 April). In fact, the Lib Dems kicked off this bidding war, being the first party to call for a significant cut in inheritance tax in July 2007 – long before the Tories did.

On the other hand, it is perhaps not surprising that the group of liberal intellectuals Reeves has assembled should have limited engagement with Lib Dem welfare policy, an area in which most of them are simply not interested. I know there is a deep psychological need for metropolitan elites supporting the Lib Dems to believe they are somehow the leading party on tackling inequality. I'm afraid they are not. Despite having many good people in their ranks, the Lib Dems' policy record on redistribution is one of shifting resources to their target group of middle-class swing voters. Their current tax plan would increase relative poverty. Over the last decade, they have been nowhere in driving changes in equalities legislation and employment rights.

It's clear that Reeves and his fellow travellers prefer the Lib Dems on voting reform and civil liberties – and these are important issues. But it might well be more honest simply to acknowledge that, for them, these issues trump any interest they might have in social justice.

Tim Horton
Research director, Fabian Society

More recently, the government has pursued an idea I advocated last summer on Newsnight’s Politics Pen, as part of the Fabian Society’s public advocacy in defence of the principle of taxing inherited wealth: namely, to freeze and not uprate the current inheritance tax thresholds.

Not only was this the right thing to do. The exchanges with Cameron in the final leaders’ debate on Thursday showed that it has helped provide an important contrast between Labour and the Conservatives’ different social priorities.

I have a lot of time for the really interesting research done at Demos, but one other aspect of Reeves' article did raise a small chuckle.

He wrote:

Some people, good liberal progressives, are waiting to see how the votes are counted on 6 May. But for some of us, sitting this one out is not an option.

Over the last two years, when the Conservatives seemed likely to form a majority government, Demos have put rather more energy into promoting "progressive Conservatism" than any think-tank on the right.

So it was good to see that, once the LibDem poll bounce changed the campaign, that there was no need to wait for the votes to come in before staking out in favour of liberal principle.

1 comment:

Stuart White said...

Well said, Tim. Voting for the Lib Dems on grounds of civil libs and electoral reform is fair enough, and Labour needs to learn some lessons from the way small 'l' liberals are leaving it at this election. But the Reeves-inspired letter was highly misleading in trying to present the Lib Dems as being also progressive (relative to others) on tax and social policy. Has Richard Reeves suddenly forgotten that the Lib Dems want to abolish the Child Trust Fund?