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2 June 2023

Inheritance tax is tragically unpopular – but Nadhim Zahawi could be the man to change that

The mildly disgraced ex-chancellor has written a column demanding someone cut his tax. Shocking.

By Jonn Elledge

Nadhim Zahawi was not quite Britain’s shortest serving chancellor of the exchequer. That title belongs to Iain Macleod, who died 30 days after assuming office in 1970, followed by Kwasi Kwarteng, who, well, we all remember what happened there.

Zahawi almost certainly can claim another title, though: the shortest time in post with the slightest hope of actually doing the job. He accepted the role from Boris Johnson following Rishi Sunak’s resignation, late on the evening of 5 July; by the morning of 7 July he had joined the clamour for the prime minister to resign. (There’s gratitude for you.) He was still, technically, in post until Liz Truss replaced him with Kwarteng on 6 September, but the time in which he could plausibly have done any actual chancellor-ing was something less than 36 hours. I have literally had sandwiches last longer than that.

Despite all that, Zahawi still managed to fit in what we shall refer to, for legal reasons, as a “disagreement” with HMRC over his tax affairs, and another with the tax lawyer Dan Neidle about whether or not it was OK to talk about it. In January, four months and two chancellors after Zahawi left office, the Guardian reported that he had paid the taxman a seven-figure settlement, including back taxes and a penalty. Good luck finding literally anything else to say about his tenure.

All of which is useful context when considering his latest intervention in British politics: a column in Thursday’s Telegraph, underneath the headline, “Inheritance tax is a spectre that haunts Britain – it must be abolished”. I’m genuinely not sure what is more remarkable: that Zahawi had the chutzpah to write it, or that the editors gave it a headline that references Marx. But the newspaper has generously decided its own contents are worthy of front-page news either way.

The former chancellor, ish, is not alone in this view, of course: he’s backed by 49 of his most socially minded colleagues, as part of a Telegraph campaign to scrap the “death levy”. It’s tempting to see this – the leading Tory newspaper getting an extremely rich and mildly disgraced ex-chancellor to write a piece demanding someone cut his tax – as proof of my thesis that right-wing newspapers are killing the Tories with kindness.

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[See also: What people miss when they criticise inheritance tax]

Then again, perhaps not, because polling has consistently found that inheritance tax genuinely is hugely, disproportionately unpopular. The article was accompanied by data from YouGov, the pollster from which Zahawi coincidentally made his money, showing that something like half of all voters have consistently thought it unfair, compared with barely a fifth who think it fair. Given how few estates actually incur it – just one in 20 – that means that a huge number of people who will never need to worry still oppose the tax.

Why, to take a leaf out of the Telegraph’s book and quote some Marxism, so much false consciousness? Part of it seems to be that it’s just too emotive. There seems to be something many people simply find icky about the whole notion of piling administrative stress or an irrational fear of losing a family home onto the recently bereaved. This is why opponents of the tax prefer terms like “death duties”: because that shifts the focus to the deceased, not their money, and suggests, wrongly, that we are taxing the dead.

Part of it, too, may be simple lack of knowledge. The reason so few estates incur the 40 per cent tax is not just that it doesn’t apply to those worth less than £325,000; it’s also that there are generous reliefs and exceptions above that too. (Homes left to children or grandchildren increase the threshold to £500,000; anything left to a spouse or civil partner does not incur the tax; and so on. Full disclosure, because I’d feel pretty icky myself not fessing up to this: I have personally benefited from the first of those rules.)

The oft-heard idea that it’s wrong to tax the same money twice is rather harder to get your head around. There are few qualms about re-taxing already taxed money when it comes to, say, VAT, but more to the point, the heirs being taxed are by definition not the ones who were taxed the first time around. Taxing recipients, rather than the estate, might address that. But perhaps the sheer quantity of money locked up in illiquid assets like property would make that impractical.

And perhaps it wouldn’t work. Perhaps this is just one of those policies where social justice and economic logic alike are simply out of tune with how people feel. Perhaps – however much damage is done by allowing people to hand substantial piles of wealth down to their children and grandchildren, however unlikely it is that most estates will pay it, however much economic inequality it locks in – the urge to pass something on to one’s children is just too instinctive to be overcome with logic and policy reports.

Nonetheless, it is hard to think of a worse ambassador for this policy than Nadhim Zahawi, a man whose chancellorship impinged upon the national consciousness only because of a disagreement with the taxman about whether or not he’d paid enough tax. It’s hard to escape the feeling that the right are entering their YOLO phase, leaping at self-serving policies while they can and to hell with the political consequences, like an octogenarian deciding to dedicate their sunset years to cigarettes and morphine.

Perhaps they’re not doing this because they think it’ll help them win; perhaps they’re doing it because they know they’re going to lose. I dread to think what other horrors they’ll be pushing in the months to come.

[See also: Why cutting inheritance tax would be the most regressive move possible]

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