Tag Archives: inheritence-tax

Vince Cable talks to Quaequam Blog!

Once again, I was delighted to be invited to be invited to take part in another of Millennium’s interviews with party figures. At first we interviewed the two leadership candidates, but it seemed like a good idea to get an interview in with Vince Cable while he was serving as acting leader. He graciously agreed to do this and so the inteview took place at teatime on Monday. But then you know all this because you’ve presumably read all the other versions of the interview already. Apologies for my lateness, I spent the rest of the evening out with friends and have only just had a chance to sit down and do the interview justice.

So, what to make of the “greatest leader we’ll never have” (TM all newspapers)? Well, when Vince first arrived in Committee Room 19 he came across as quite diffident and uncomfortable. Right from the start it was apparent this was not going to be like the interviews we’d had with Chris Huhne and Nick Clegg.

Millennium allowed me to start off and, a little unprepared, I proceeded to spend five minutes waffling on about what should have been a very simple question: given the party’s opposition to the “Conservative consensus” and the Liberal tradition’s opposition to inherited wealth, how did Vince justify our presently uncosted policy to increase the IHT threshold up to £500,000 (for more on this by me, see Comment is Free)?

Vince’s short answer was that our policy is to crack down on IHT, and that the real issue is that the way IHT has been set up means that the wealthy find it very easy to get around it and that it is the comparatively less well off that end up paying it. The Lib Dem policy to extend the so-called “seven year rule” so that gifts would only be exempted if they were made fifteen years before the individual’s death would make it harder to avoid.

Was I convinced by this? I’m afraid not, for three reasons. First of all, the policy has never been sold as “toughen up IHT”, but rather “raise the starting threshold” (pdf). The matter of the threshold wasn’t dealt with at all, despite it being the basis of my question. But finally, I have serious doubts about the practicalities of extending the gift rule. Both my mother and my partner’s family have recently gone through probate. It takes a long time and isn’t a walk in the park. If the concern is for middle-class families who find themselves caught out by the system, I have real concerns that these are precisely the sort of people who will end up getting screwed. Meanwhile, it may catch out the super-rich at the margins, but only those who die in skiing accidents as opposed to the ones who die in their beds. In short, for people already well versed in avoiding the tax, it will be a mild annoyance. For the rest of us, it will be a serious hassle. I’m still entirely unconvinced this is a more practical policy than an accessions tax, I’m afraid.

My second question was about multiculturalism, something which Vince has written two Demos pamphlets on the subject. I made the mistake of poorly phrasing my question, asking how we “calm down” the current debate on conflicting identities in the UK, something which he strongly rejected we should seek to do. Instead, he said, we should try to create a society where such debate can flourish, knowing that conflict will arise from time to time. He singled out Evan Harris for taking part in the Oxford Union debate with David Irving last week. On tackling discrimination there were no simple, coin-in-the-slot answers, he argued, pointing out that the experience of different ethnic communities – not least of all the white working classes who deserve the same attention as any other group.

This is all impeccably liberal stuff, and despite my rants about the Oxford Union last week I’m quite happy that Evan was there to argue against Irving given that the meeting was going to go ahead anyway (I still question the Union and its rather selective approach to free speech however) – I certainly don’t condone the rather strong arm tactics of the protesters who attempted to shut down the debate by force. But I don’t think it moved us forward particularly. What I was hoping for was a pocket summary and update of his latest paper on the subject Multiple Identities – a pamphlet which I enjoyed even if I didn’t agree with all of it. I got the sense this question rather irritated him however, which wasn’t my intention at all.

Vince warmed rather more to my final question however, on how he rated George Osborne. His answer was, basically, that Osborne is a smart political operator but an economic lightweight. He argued that Osborne and Cameron are inseparable and that he would stand or fall with his leader.

In particular, he took issue with the Conservatives’ “opportunistic” stance on Capital Gains Stance, pointing out that the Tories opposed taper relief when it was first introduced by George Brown. This is a good point, and one which we perhaps ought to drive home more strongly.

Overall, Vince gave us all fairly straightforward answers and by the end had warmed up immensely. I particularly appreciated his responses to Paul’s question about Gordon Brown’s “psychological flaws” (he doesn’t have them, but has deep intellectual flaws) and his satisfactory answer to Jonny’s question about whether the “Mr Bean” line was doing the same to Brown as we deplore was done to Ming (answer: Ming was criticised for his appearance while Cable was criticising Brown for his ineptitude). He was quite insightful, and surprisingly upbeat in response to Alix’s question about the Heathrow expansion, arguing that it wasn’t a done deal, that the fact that the environment has gone up the political agenda makes it much harder for the government compared with the last Heathrow expansion and that could only happen if the government were to get its way over planning reform (which is being strongly opposed in the Lords).

The best leader we’ll never have? Impossible to tell. If he had been a candidate I suspect we would have had a very different interview, just as he would have had a very different past month. It is clear that he is a major talent however and one that the new leader – whoever he is – should ensure remains at the centre of our front bench team.

See also: Liberal England, Liberal Burblings, Lindyloo’s Muze, The People’s Republic of Mortimer, Millennium Elephant (plus Love and Liberty and Hug a Hoodie when they get around to typing their versions up).

Gideon Osborne on followership

Which party was the first in this Parliament to call for an increase in the IHT threshold?

The Liberal Democrats

Which party was the first to call for replacing air passenger duty with a tax on planes?

The Liberal Democrats

I ask, because Gideon Osborne has today been branding the “theft” of policies as “scrabbling around in a panic,” a “cynical stunt” and “followership not leadership.” If the cap fits…

Those Redwood tax cuts – a question of priorities

I’ve been going down the list of tax cuts that John Redwood is proposing. Scrapping inheritance tax, lowering corporation tax, raising the super tax threshold, restricting capital gains… to be brutally honest, I regard all of these as good things in principle, but even leaving aside the affordability issue, how can they be said to be priorities?

Inheritance tax, for example, certainly does hit a lot of middle-income families these days. But what would you prefer? A tax cut on your estate when you die, or a tax cut on your income now? I know that I for one would prefer the latter. Happily, I’d also argue it is better for both the economy and society more generally.

As I’ve argued before, the accretion of wealth within an ever declining number of families is not a particularly healthy thing for our society. It creates a situation whereby, because of historical accident, some individuals end up higher up on the ladder than others. If that wealth is bound up in property, it is a finite resource and our existing financial system creates a situation whereby the more property you own, the easier it is to acquire more. As it is a finite resource, that means that, over time, private ownership becomes nothing more than a dream for more and more people and an underclass emerges.

To a certain extent you might argue that is inevitable, but if anything ought to be a candidate for taxation, it is this. Indeed, the creation of IHT and other fiscal tools in the last century have done much to create a more egalitarian society which we now seem to be slowly slipping away from.

IHT’s biggest problem is that it doesn’t do this terribly well. Nothing a half-competent financial adviser can’t wriggle around any way. There are better ways of taxing wealth such as a land value tax. Needless to say, this isn’t top of Redwood’s wish list.

For me, the “Competitive Challenge” is to ensure that the fruits of people’s labours and entrepreneurship are kept by the individual to as great an extent as possible. IHT doesn’t make our economy uncompetitive; income tax does. The point at which the 40p rate for income tax kicks in isn’t the main issue: the 20p rate and the level of personal allowance are. And then, of course, there’s VAT (which Tories historically seem to love).

But if I don’t understand the economic case for Redwood’s priorities, I understand the political case even less.

It’s a gift to the Lib Dems: not only are our policies better targeted at people at the lower end of the scale (I’d go further, but that’s another issue), we explain how we will pay for it. Redwood’s case, by contrast, is tax cuts for the relatively well off, paid for by vague, amorphous cuts in ‘red tape’. I for one would relish that particular fight.