Good news for houses like these. Photo: Carl Court
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Cutting inheritance tax will be good news for a privileged few, bad news for the rest

Cutting inheritance tax will mean happy days for the top 10 per cent, and nothing to everyone else.

The UK’s archaic taxation system taxes income too heavily but wealth too lightly. This acts as a roadblock to social mobility, which is the lowest in the western world.

And George Osborne is about to make it worse. When he unveils his Budget, the Chancellor will announce an increase in the individual inheritance tax threshold from £325,000 to £500,000, fully transferable between couples. No inheritance tax will be paid on a couple passing on a £1 million house to their children.

Only the wealthiest families will benefit. If the inheritance tax threshold were left untouched until 2018-19, it would only affect 10% of people. While cutting it does nothing for those in the bottom 90%, it amounts to a boon for those inheriting houses worth £1 million to £2.35 million (when the cut will be fully tapered off). Someone inheriting a £2 million home will benefit more than someone inheriting a £950,000 home. Exactly how this policy fits into the ‘One Nation’ playbook is not clear.

Osborne once recognised the great structural flaw in the UK’s taxation system. According to In It Together, Matthew d’Ancona’s study of the coalition, Osborne and Nick Clegg agreed a ‘grand bargain’ in 2012: reducing income tax to 40% and introducing a mansion tax in return. But David Cameron had other ideas. “Our donors will never put up with it,” the Prime Minister said before vetoing the idea.

Now taxation is becoming even more dependent on income rather than wealth. The inheritance tax cut will be paid for by reducing pension tax relief for those earning over £150,000; hardly a group many feel much sympathy for, but the upshot will be to prioritise those who inherit money over those who earn it.

None of this is to say that inheritance tax is perfect. It is “a somewhat half-hearted tax, with many loopholes and opportunities for avoidance through careful organization of affairs,” as the IFS-led Mirrlees Review into inheritance tax noted in 2011. On the grounds of equality of opportunity, it advocated instead taxing individuals at progressive rates on the total amount of gifts and inheritances they received over their lifetime. Radical leftism this is not: Edward Heath’s Conservative government in 1972 proposed a similar policy.

Robert Halfon, the Conservative Party’s vice-chair, wants to make the party logo a ladder to symbolise opportunity. Yet the cut to inheritance tax will show no regard for equality of opportunity. Instead, it will entrench a system of taxation that favours those who have inherited money rather than those who earned it. By making property an even more attractive investment for the wealthy, it could lead to house prices rising even more. And cutting inheritance tax also risks reducing economic growth: a Royal Economic Society study three years ago suggested that increasing inheritance tax while reducing income tax could increase growth by creating greater incentives to work.

Eight years after proposing to do so, George Osborne will finally make good on his pledge to deliver on inheritance tax. The party faithful will be delighted. But the risk for the Conservatives is that the combination of £12 billion of welfare cuts with a tax cut for the wealthiest families will exacerbate their image as the party of the rich.

Tim Wigmore is a contributing writer to the New Statesman and the author of Second XI: Cricket In Its Outposts.

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.