The left should applaud Osborne's inheritance tax U-turn

The Chancellor's decision to freeze the inheritance tax threshold at £325,000, rather than raise it to a £1m, is an opportunity to put the principled case for the tax.

Back in 2007, when the Tories as much as Labour assumed that boom and bust had been abolished, George Osborne told his party's conference that a Conservative government would raise the inheritance tax threshold to £1m. It was unacceptable, he said, that a tax "designed to hit the very rich" was increasingly borne by "ordinary people". The pledge was a political masterstroke, prompting a surge in support for the Tories and spooking Gordon Brown into abandoning plans for an early election. 

But the policy looked less impressive by the time of the general election when Osborne's declaration of an "age of austerity" sat uneasily with a pledge to cut taxes by £200,000 for the wealthiest 3,000 estates. The Chancellor, according to Janan Ganesh's recent biography, was secretely glad when the Liberal Democrats gave him political cover to abandon the pledge.

In last year's Autumn Statement, he announced that the inheritance tax threshold, frozen since 2009 at £325,000 (£650,000 for couples), would rise by a paltry 1 per cent in 2015-16 to £329,000. Now he's set to announce that, in fact, it won't rise at all. Instead, to help meet the £1bn a year cost of the coalition's social care plan, the threshold will be frozen at £329,000 until at least 2019. Many more "ordinary people", to use Osborne's phrase (although the average house price is £249,958), will be hit by inheritance tax. Were the threshold to rise in line with inflation, it would stand at £420,000 in 2019. 

In other words, Osborne is effectively increasing the tax - and he is right to do so. If "equality of opportunity" is to be more than merely a slogan, a progressive inheritance tax system is essential to prevent privilege being automatically transferred from one generation to the next. As Warren Buffett sagely observed when he campaigned against George W. Bush's plan to abolish "the death tax", one would not choose the 2020 Olympic team "by picking the eldest sons of the gold-medal winners in the 2000 Olympics". It would, he added, replace a meritocracy with an "aristocracy of wealth". Inheritance tax is currently levied at 40 per cent; a progressive government would consider introducing a higher band for the wealthiest estates. 

Osborne's U-turn may have more to do with his desperate need for revenue than any conversion to progressive taxation but it is an opportunity for Labour to finally make the principled case for the tax. 

George Osborne plans to freeze the inheritance tax threshold at £325,000 until 2019. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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After a year of division, a new centre is emerging in Labour

Clive Lewis, Lisa Nandy and Jonathan Reynolds show how factionalism is being transcended. 

On 26 September, Clive Lewis sat onstage at Labour’s conference in Liverpool and puffed out his cheeks in exasperation. He had just been informed that a line in his speech as shadow defence secretary committing the party to Trident renewal had been removed by Jeremy Corbyn’s office. Such was his annoyance that he was said to have later punched a wall in anger ("I punched no walls," he told me when we recently met). 

For Lewis, however, the feud proved to be a blessing. Hitherto hostile MPs hailed his pragmatism and deference to party unity (he is a long-standing opponent of Trident renewal). The former soldier also affirmed Labour’s support for Nato and for collective self-defence. “The values that underpin Nato are social-democratic values: liberty, democracy, freedom of expression,” Lewis, an early Corbyn ally, told me. “Let’s not forget, it was Clement Attlee and the New Deal Democrats who initiated and set up Nato. It’s about being in it to win it. It’s about winning the arguments inside Nato and making sure that it’s a force for good. Some people would say that’s impossible. I say you’ve got to be in it to be able to make those changes.”

In October, Lewis was replaced as shadow defence secretary by Nia Griffith and became shadow business secretary. Many regarded the appointment as a punishment. “Do I think there was an ulterior motive? I’ll never know,” Lewis said. “I’m confident that the reason I was moved – what I was told – is that they wanted me to be able to take on a big portfolio.”

Whatever the truth, Griffith has since said that Labour’s next general election manifesto will include a commitment to Trident renewal and will support multilateral, rather than unilateral, disarmament.

Many MPs had long feared that the divide between them and their leader would prove unbridgeable. Some contemplated standing on bespoke manifestos. Yet with little drama, Corbyn has retreated from a conflict that he could not win. Labour’s conference, at which the largely pro-Trident trade unions hold 50 per cent of the vote on policy and which the leader has vowed to respect, would never have endorsed unilateralism.

“Jeremy Corbyn deserves credit for that,” Lewis said. “Everyone understands that his position hasn’t changed. He still believes in unilateral disarmament . . . But he’s also a democrat, and he’s a pragmatist, despite what people say.”

In policy terms, at least, Labour will contest the next general election as a less divided party than many anticipated. As Corbyn’s team has long emphasised, there is unity around issues such as opposition to spending cuts and support for rail renationalisation. A new centre for Labour, embodied by Lewis, is emerging.

“When I became an MP,” the 45-year-old told me (he was elected in Norwich South in 2015), “to be anti-austerity, to say that cuts don’t work and they’re bad economics, meant you weren’t in touch with reality, and that you had no interest in winning elections. Within the space of 18 months, there’s now a growing consensus that cuts aren’t the way forward and that we need an industrial strategy.”

Theresa May’s support for new grammar schools and “hard Brexit” has given Labour MPs other issues to unite around. After Corbyn’s second landslide leadership victory, many of his opponents have reached the final stage of grief: acceptance. Others, as Lewis noted, are imbued with “an eager enthusiasm to make this work”. Contrary to some predictions, more than half of the 63 frontbenchers who resigned last summer have returned.

An emblematic figure is Jonathan Reynolds. The Liz Kendall supporter, who resigned as shadow transport minister in January 2016, has rejoined the front bench as shadow City minister. Earlier this year, Reynolds backed the introduction of a universal basic income, an idea that is now being explored by John McDonnell’s team (and that Barack Obama has called for “debate” on). In July, Reynolds and Lewis wrote a joint piece in support of proportional representation (PR), warning that without it “a more equal, democratic and sustainable society is less likely”.

Another advocate of PR is Lisa Nandy, the former shadow energy secretary and a friend of Lewis (on 26 October, along with Reynolds, they called for Labour to stand aside in the Richmond by-election to aid the Liberal Democrats). In the view of some, the defining divide in Labour is no longer between left and right but between open and closed. On one side are pluralists such as Lewis, Reynolds and Nandy, while on the other are tribalists such as Ian Lavery (pro-Corbyn) and John Spellar (anti-Corbyn).

The division stretches to the top, with McDonnell in favour and Corbyn opposed. “It’s a work in progress,” Lewis said of his efforts to convert the Labour leader. “There’s a growing movement of MPs who now either support PR or understand the growing necessity for it. They may not be quite there themselves, but they’re moving in that direction.”

At times since Corbyn became leader, the parliamentary party’s divisions have appeared to many to be insurmountable, even as the party in the country has grown and been inspired by Corbyn. Yet a new consensus is being forged in the PLP: anti-austerity, pro-Trident, pro-Nato and, increasingly, committed to political and constitutional reform. If there is any consolation for a becalmed Labour Party, it is that its European counterparts are faring little better. In Spain, France and Germany, an already divided left is further fragmenting.

But Labour is likely to both fight and survive the next general election as a united force. If Lewis can retain his seat in Norwich (he has a potentially vulnerable majority of 7,654), he could one day act as the bridge between the party’s “soft” and “hard” left. After a year of factional skirmishes, the common ground in which Labour’s future will be shaped is emerging.

George Eaton is political editor of the New Statesman.

This article first appeared in the 27 October 2016 issue of the New Statesman, American Rage