On inheritance tax there is a "credibility gap"

Cameron's plan remains unfair and unfunded

David Cameron has denounced Alistair Darling's 148-page dossier on the "credibility gap" in the Tories' spending plans as "complete junk from start to finish". So are the Tories' spending commitments fully costed? Here's one that isn't.

Cameron claimed again today that sweeping cuts in inheritance tax could be paid for by "taxing the non-doms". The party's pledge to raise the inheritance-tax threshold -- currently £325,000 -- to £1m would cost £3.1bn a year. Cameron hopes to raise this amount by charging non-doms £25,000 a year to live and work in the UK. The Tories estimate that about 150,000 residents would pay the levy, raising £3.5bn and funding cuts in inheritance tax and a rise in the stamp duty threshold to £250,000 for first-time buyers.

But the Tory proposal overestimates the total number of non-doms. The latest HMRC figures show that there are only 120,000 currently registered. Ken Clarke was admirably honest when he conceded: "We don't know how many non-doms will be here; we don't know how much our policy of raising fair taxation from foreigners who work in this country will raise." It's a pity his leader can't be.

The commitment to cut inheritance tax could yet become politically toxic for the Tories, particularly if the suspicion that a Cameron government would increase VAT grows. History teaches us that when in need of revenue, the Tories raise VAT, the most regressive tax of all.

It was Margaret Thatcher who almost doubled VAT from 8 to 15 per cent in 1979 in order to slash income tax and it was John Major who raised VAT by 2.5 per cent to its current level of 17.5 per cent.

Over at Comment Central, Daniel Finkelstein astutely notes that Darling himself still refuses to rule out raising VAT to 20 per cent. The Chancellor's plan to do so in the pre-Budget report was overruled by Gordon Brown. By contrast, Ed Balls (writing outside of his brief) has accused the Tories of secretly plotting to increase VAT and has attacked George Osborne for refusing -- like Darling -- to rule out a rise.

Balls might be keen to use these lines on the campaign trail, but VAT could yet become a dividing line between him and the man he still longs to replace.

 

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George Eaton is political editor of the New Statesman.

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Lord Sainsbury pulls funding from Progress and other political causes

The longstanding Labour donor will no longer fund party political causes. 

Centrist Labour MPs face a funding gap for their ideas after the longstanding Labour donor Lord Sainsbury announced he will stop financing party political causes.

Sainsbury, who served as a New Labour minister and also donated to the Liberal Democrats, is instead concentrating on charitable causes. 

Lord Sainsbury funded the centrist organisation Progress, dubbed the “original Blairite pressure group”, which was founded in mid Nineties and provided the intellectual underpinnings of New Labour.

The former supermarket boss is understood to still fund Policy Network, an international thinktank headed by New Labour veteran Peter Mandelson.

He has also funded the Remain campaign group Britain Stronger in Europe. The latter reinvented itself as Open Britain after the Leave vote, and has campaigned for a softer Brexit. Its supporters include former Lib Dem leader Nick Clegg and Labour's Chuka Umunna, and it now relies on grassroots funding.

Sainsbury said he wished to “hand the baton on to a new generation of donors” who supported progressive politics. 

Progress director Richard Angell said: “Progress is extremely grateful to Lord Sainsbury for the funding he has provided for over two decades. We always knew it would not last forever.”

The organisation has raised a third of its funding target from other donors, but is now appealing for financial support from Labour supporters. Its aims include “stopping a hard-left take over” of the Labour party and “renewing the ideas of the centre-left”. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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