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Jon Trickett (Hemsworth) (Lab)
I beg to move,
That this House has considered inheritance tax.
I am looking forward to your firm guidance from the Chair, Sir Robert. I am grateful to the House authorities for allowing us to have this important debate.
The whole British tax system is skewed in a very odd way. We simply do not tax wealth sufficiently, but we do tax income from work. Income from wealth is relatively untouched by the taxation system, but income from work is taxed and people feel the burden of it. If we were to redesign our whole tax system, I wonder whether that is the way we would structure it. My office wrote a report on this issue three years ago, suggesting a wealth tax. If there were to be a wealth tax, we might well be able to change the way we tax inheritance, but that is not the case; it is not a serious proposal for now, but it is something to think about in the longer term.
It is good to see so many Members here. I begin my reflections on inheritance tax with the following reflection: it is always interesting to look at the language politicians use, especially those from the governing party. When Labour proposes a spending commitment, the Government say that we have found a “magic money tree”. When the Tories find money to spend or give away in tax gifts, suddenly it is “wise”, “prudential” and “management of the economy”. Of course, it is no such thing; it is propaganda.
The right-wing papers are saying that there is some “fiscal headroom” in the Budget—in other words, the Treasury is sloshing around with money. But where has the money come from? It has come from hard-working people who are overtaxed on their income. There might be other ways to fund state services, but it is the working people who have created the additional money in the Treasury. That has been done through a cruel system, which is no longer quite as invisible as it was, called fiscal drag, whereby people’s wages and salaries are increasing but the threshold at which they pay tax is being held steady by a Conservative Government who have clearly set out to raise more money from working people. The fact that thresholds are being held steady while wages are rising means that people are paying more as a proportion of their income than they would have done if the thresholds had risen at the same rate.
Mr Ranil Jayawardena (North East Hampshire) (Con)
Will the hon. Gentleman give way?
Jon Trickett
There are a lot of Members present, so I will give way only once—twice at the most.
Mr Jayawardena
Given that the hon. Gentleman is concerned about fiscal drag, as am I, would he concede that, given that the £325,000 threshold for inheritance tax has been fixed since 2007, it should be increased in order to avoid fiscal drag?
Jon Trickett
I find that a very interesting intervention. I am not opposed to considering that idea as part of the wider debate, but let me return to the point I was trying to develop.
It looks as though right-wing ideologues in newspapers and elsewhere are hinting that there is a significant amount of money available in the Treasury. Those papers are saying that we should end inheritance tax or perhaps cut it. It would cost £7 billion of the Treasury’s reserve of money to abolish inheritance tax completely. I guess that all Members present will have been around their constituencies in the recent Christmas and new year recess, and they will have seen people hungry and living on the streets, schools closed because the concrete problem has not been resolved, hospitals with cruel waiting lists, people unable to heat their homes, and even unfilled potholes.
What we have seen in our own constituencies is true for the whole nation. There are massive pressures on our civil society and the way we live our lives. If we were the Treasury and had £7 billion, would we really want to hand over money to some of the richest people in our society, when all those needs are still there, and when maybe we should be trying to help people on lower pay with some assistance on tax? I don’t think so. I do not think it is a rational decision and a proper way to spend money, and nor do the public. In two recent polls, 75% said they were against a cut in or the abolition of inheritance tax.
Jon Trickett
I said I would give way twice. The right hon. Gentleman has already had one intervention, so I will only take another from somebody else; a lot of people want to speak.
I am sure we are all clear on this, but let us remind ourselves how the system works. One argument that might be made is, “Are you really saying that if you’ve worked hard all your life and managed to buy a house, your descendants can’t inherit that house?” Well, the rules are quite clear. It is not as people might imagine, because a person is allowed half a million pounds with no inheritance tax on the house value. With a couple, however—whether they are married or in a civil partnership—the partner left behind after the other has died inherits the house with no tax; we all know that. When the second person in the marriage or civil partnership dies, the first person’s £500,000 is accumulated to the second person’s £500,000, so that is effectively £1 million per house. Nobody in a couple who owns a house in that particular way would pay any inheritance tax on the house, so it is a specious and false argument to say that inheritance tax would somehow deprive people of their houses.
Look at the figures. In Yorkshire, only one in 300 properties is worth more than £1 million. All the rest are worth substantially less. In the whole of Yorkshire, there are 7,500 households worth more than £1 million. Across the whole country—of 60-odd million people—there are 700,000 properties worth more than £1 million. It is important to put that on the record, before we go any further into the debate.
If someone leaves more than £1 million, they may well be required to pay inheritance tax. Let me deal with what actually happens, based on figures provided by the Financial Times, which are based on Treasury figures. If someone leaves an estate worth more than £5 million, they will find that the amount of money they pay in inheritance tax declines. The people between £1 million and £5 million are probably paying 40%—unless they have made certain arrangements—but the really wealthy estates above £5 million, where the power and wealth in our society resides, pay less and less tax the more wealthy they are. Hon. Members can see the graphs; they are freely available on the internet. The richest estates in our country pay virtually nothing at all in inheritance tax. Can that really be right? I do not believe it is morally justifiable.
I do not want to name too many very wealthy people, but let me name one, because it has been in the newspapers. The Duke of Westminster, one of the richest men in the country, inherited well over £6 billion—I think, nearly £7 billion—through various trusts and other arrangements, but according to the right-wing newspapers—the Daily Mail, Daily Express and others—the estates more or less avoided any form of tax at all. How can it possibly be right that that kind of wealth should be handed on, while people who work hard and have maybe managed to accumulate more than £1 million in their lifetimes are paying 40% tax on the residual amount they arrive at?
In Scotland—I have no doubt my hon. Friend the Member for Glasgow East (David Linden) from the SNP may well mention this—500 families own half of all the land. That is barely touched through the way we deal with inheritance. I do not think that is justifiable, when the half the land of a whole nation is held by 500 families.
I discovered something quite extraordinary in my constituency while researching this issue. I will not name anyone, because this case has not been in the papers. There is an estate of more than 3,000 acres in my area, with 5,000 acres elsewhere and a further 3,000 somewhere else. That large estate, in place since the 16th century, has been barely touched by any form of inheritance or wealth tax over the centuries. That estate remains in place. What is extraordinary is that there is an agreement between the Treasury and the people who leave these large estates that if they cannot pay the inheritance tax, they can donate a work of art. I will be interested to hear the Minister defend that.
It was extraordinary to find that the owners of that property in my constituency avoided inheritance tax on one of the largest estates in the country, which has been left untouched for four centuries, because they were able to gift to the nation a bookshelf—okay, it was a valuable bookshelf. That bookshelf was given in place of paying inheritance tax. How can that possibly be correct?
What is even more extraordinary is: where is that bookshelf now? It is in the very stately home where that particular family still has some residential rights. Of course, it is available for the public to see if they visit. None the less, it is extraordinary that someone earning £10,000 or £15,000 a year—struggling—is paying bloomin’ tax, but a multimillionaire with hundreds of millions of pounds and an estate can avoid tax by handing over a bookshelf that remains in the very house where their family have lived for centuries.
The senior economist at the Institute for Fiscal Studies, which is hardly a hotbed of Marxist thinking, said overnight that it is not in favour of changing inheritance tax, except to say that we should avoid all of the reliefs and the systems by which people can escape inheritance tax, which makes it unfair and skews the taxation system as a whole. It wants to see the loopholes that some of these richer families use closed. For example, it is possible to put money in a trust. If it is agricultural land that is being farmed, there is no inheritance tax on it. Such estates remain there—a blight on our system and a way of securing the continued existence of the British class system, which has caused so many problems for our country.
Let me turn from the very wealthy to other people who pay inheritance tax. Less than one in 25 people who die leave an estate that is subject to inheritance tax; that is under 4%. More than half the constituencies in the country pay no inheritance tax at all, or none that can be measured. That figure is from the Financial Times. Ending inheritance tax would not put a single penny into all those constituencies. There would be no benefit to them whatsoever, as far as I can see, from the relief of inheritance tax.
Jon Trickett
No, I will not give way—the right hon. Gentleman will have a chance to speak in a moment.
I want to illustrate what is happening. I think I am right in saying that, if inheritance tax were abolished, it would put £12 million back into the Minister’s constituency, which makes £60 million in a five-year Parliament. In all the 42 red wall seats in the north of England, which went from Labour to Tory, that sum is hardly more. All those seats together would raise £15 million a year in inheritance tax. Abolishing inheritance tax would put a fraction of the amount of wealth in our country back into those constituencies, and then only into the hands of the richest in our society.
Jon Trickett
I will give way, but briefly, because I want to make progress.
Peter Gibson
I am grateful to the hon. Gentleman for giving way. I am following his logic about money staying in a constituency where inheritance tax falls, but that presupposes that all beneficiaries of that deceased’s estate live and reside in that constituency, which is not the case. Beneficiaries often live throughout the country.
Jon Trickett
The hon. Gentleman raises an important issue, because I think there is £800 billion of wealth in our country that nobody—not even the Treasury—knows the owners of. That is a colossal, unimaginable amount of untaxed wealth, which has simply disappeared because the Treasury cannot find out who owns it. It is true that people can reside in one place and own property in another, but I am talking about someone’s place of residence when they died.
Let me remind Members of the figures, because I do not want to lose the argument. In all of the red wall seats that Labour lost to the Tories, £15 million in inheritance tax was paid; only in three of those seats did anyone pay any inheritance tax. However, in the 42 blue wall seats that I have looked at, £1.5 billion was paid in inheritance tax. So in Tory seats in the south and south-east, and to some extent in London, £1.5 billion was paid, while only £15 million was paid in all of the so-called northern red wall. That is a completely extraordinary set of figures.
I think Ministers and right-wing commentators really fail to understand the way in which our society is structured, with the inequalities and all the other problems that we face on a daily basis. If it were to happen, the abolition of inheritance tax would be one of the largest shifts of wealth that has ever taken place under any Chancellor, certainly in recent history. I have been in Parliament for 28 years and I do not remember anything as large. Here is the central point: this is not a fiscal strategy, and it is not about justice, or fairness, or responding to what the people of the country want. It is a political strategy to move money into those areas where the Tories are now extremely worried that they are going to lose their seats. This is about pumping money into blue wall seats. It is a political strategy rather than a fiscal one.
That is where we are. The Government think that they can bung people, whether with contracts or honours or by putting money back into the pockets of the richest people in our society, in order to secure their own continuance in office. But the British people do not like this stuff. It is grossly unfair and it should not be happening. I hope that the Minister can say, “Well, we might have had a look at it, but we’re not going to do it, because—you’re correct—it would be unfair.”
Peter Gibson (Darlington) (Con)
It is a pleasure to serve under your chairmanship, Sir Robert, and I congratulate the hon. Member for Hemsworth (Jon Trickett) on securing this important debate.
As a practising solicitor—I draw the House’s attention to my entry in the Register of Members’ Financial Interests—it was common for me to provide advice to clients while they were planning for later life. While I was drafting wills and preparing powers of attorney, the dreaded subject of inheritance tax often came up. It is indeed a much-feared tax and a real motivator for many people to consider estate planning.
As house values have increased, many more families who never before would have considered themselves to be wealthy are brought into the scope of inheritance tax. For many, however, through proper planning and structures, it can be very much avoided. Indeed, it is often said that inheritance tax is a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue. As a Conservative, I believe that families should be able to keep as much of their money as possible and, ultimately, I would like to see the complete abolition of inheritance tax, when the time is right.
I only have a very short speech; I really only have one suggestion to put to the Minister. A number of years ago, additional nil-rate bands were introduced to enable a joint estate to leave up to £1 million free of inheritance tax. However, that privilege only extends to those who have children, either naturally or by adoption. It seems unfair that those who have children can be given a significant tax advantage that does not benefit those who either do not choose to have children or are unable to have children. To my mind, a much fairer approach would be to equalise the inheritance tax threshold at £500,000 for everyone, enabling even childless couples to leave an estate of up to £1 million free of tax.
Mr Jayawardena
I thank my hon. Friend for what he has said. Does he agree that by doing those sorts of things—lifting thresholds, taking people out of fiscal drag and giving more people the opportunity to benefit from a nil-rate band—we would actually be able to grow the economy? As the Swedish equivalent of the CBI has said,
“if you abolish a stupid tax that is complicated and forces wealthy people to leave the country”—
or, by extension, reduce the amount that people pay—
“you get more tax revenue…That is the Swedish experience.”
Peter Gibson
I completely agree with my right hon. Friend. We know that when we reduce a tax, the effect has the potential to cascade throughout families—and throughout the country, because not all beneficiaries of estates necessarily live in the constituency where the house that is left behind is situated.
I will conclude on that point. Will the Minister respond specifically to my point about the equalisation of rates for all individuals?
Sir Robert Syms (in the Chair)
Thank you for the short speech. If we stick to about five minutes each, I think that we will get everybody in.
Grahame Morris (Easington) (Lab)
It is a pleasure to serve under your chairmanship, Sir Robert. I congratulate my hon. Friend the Member for Hemsworth (Jon Trickett) on securing the debate, which is an opportunity for us as Members of Parliament to think about the sort of society that we wish to create. It is interesting that Conservative Members intervened on my hon. Friend to talk about raising thresholds, fairness and so on. I say to any of my constituents who have tuned into the debate: let us not lose sight of the fact that currently only 5% of people pay inheritance tax. That means that 95% do not pay it. If we are talking about fairness and the type of society that we want to create, we should look at the implications of either abolishing or providing further concessions to those currently liable for inheritance tax.
I know that this debate is narrowly defined. On previous occasions, I have asked whether we are serious about providing additional support for ordinary working people—not the 5%, but the 95%. Why are we not considering a proportional property tax to replace council tax? That would boost the income of every household in Easington on average by more than £750 per year, not 5%. There are levers that can be pulled, and that one would be revenue neutral. It would not involve levying any additional taxes; it would be a simple matter of applying a proportional property tax at a fixed percentage of the value of a property.
Peter Gibson
I am grateful to the hon. Gentleman, who I consider a friend, for giving way. I am interested in his points on a proportional property tax. We know from research that northern constituencies like ours would benefit significantly from that. Does Labour propose to include it in its manifesto?
Grahame Morris
Regrettably, at this point, no. As the hon. Gentleman is well aware, I am not a Front-Bench spokesperson for the Opposition. Irrespective of which political party grasps this nettle, it will bring enormous electoral dividends. There have been academic studies about the benefits of a proportional property tax. My constituency, the hon. Gentleman’s constituency of Darlington and virtually every constituency in the north and the midlands would be better off. [Interruption.] I apologise, Sir Robert: we are talking about inheritance tax. I was tempted off the subject—it was my own fault, and I am sorry.
The fundamental question is: are we going to champion equality, fairness and social justice, or are we going to perpetuate wealth inequality? Are we a democracy or a plutocracy? The current system is already generous. As my hon. Friend the Member for Hemsworth said, it allows £325,000 to be passed on tax free, and where a child or grandchild inherits an estate including a home, the threshold is £500,000. Above those thresholds, a 40% tax rate is applied, which means that a £1 million estate would pass on £800,000 to the beneficiaries.
As my hon. Friend indicated, there is chronic tax avoidance. In 2016, the Duke of Westminster inherited a huge estate that estimates suggest was worth about £9 billion. Reasonably, the Exchequer would anticipate a tax liability of about £3.5 billion at 40%, but sadly, by employing tax avoidance, using very clever lawyers and getting the best advice on trust laws, the aristocracy and the richest in our society regularly avoid paying their fair share of tax. We should be outraged at that. I suspect that in other countries there would be riots and demonstrations, but that is not our way.
Part of the problem is that the issues are not aired objectively through the mainstream media. This abuse of privilege not only entrenches economic inequality but places a larger tax burden on the vast majority—the 95% who do not inherit large family assets and are struggling in this cost of living crisis with stagnating wages and the highest tax burden in modern history. Tory plans to cut inheritance tax will not help my constituents. Instead of funding tax cuts for the richest on the backs of the poor, the Government should be looking to close the inheritance tax loopholes exploited by the wealthiest.
The sixth Duke of Westminster, Gerald Grosvenor, who passed away in 2016, outlined his advice to entrepreneurs on how to be successful. He was speaking at some sort of conference or event, and he suggested that the best way was to have an ancestor who was good friends with William the Conqueror. As with many tongue-in-cheek comments, there is a grain of truth in that advice.
Inheritance tax is meant to address widening inequality in society by taxing those with the greatest assets. However, wealth and privilege are entrenched in this country. Elite schools dominate our politics: we have had Prime Ministers from Winchester and Eton. The majority of our leaders went to elite universities. Perhaps I should correct that by saying “a single elite university”, since 13 out of 17 post-war Prime Ministers—more than 75%—attended Oxford University. Given that our leaders are entrenched in wealth and privilege, we should not be surprised that the Conservative party seeks to maintain a status quo that sustains that existence. Our society is dysfunctional when the richest 50 families in the UK have more wealth than half the population. Just think about that: they have more wealth than 33.5 million people. Recent analysis by Ben Tippet and Rafael Wildauer from the University of Greenwich found that if the wealth of the super-rich continues to grow at the current rate, by 2035—not too far away—the wealth of the richest 200 families in the UK will be larger than the whole of the UK’s GDP.
There is immense wealth in our society. Most people do not realise that there is sufficient wealth in society to address the range of economic, social and investment challenges that we face. The accumulation of wealth, concentrated in the hands of a few, is detrimental to a fair society. Those with immense wealth are not using it for the good of society. My constituency—no surprise here, Sir Robert—is devoid of benevolent billionaires; I wish we had a few. I am not a believer in trickle-down economics. However, my constituents look to the Government to create an economy and society that uses the wealth that they have generated to improve the quality of life for all. That is a task that this Government are failing to deliver on, not through neglect but through a deliberate policy that entrenches and expands pre-existing economic inequalities.
Ian Lavery (Wansbeck) (Lab)
It is a pleasure to serve under your chairmanship, Sir Robert. I thank my hon. Friend the Member for Hemsworth (Jon Trickett) for bringing this debate to this Chamber; it has been interesting to listen to the contributions that have been made. My hon. Friend the Member for Easington (Grahame Morris) gave some alarming statistics about widening inequalities. He spoke about the entrenched wealth and privilege that is rampant in this country.
I am not surprised that, at this stage in this Conservative Government, the Tories are looking to halve or abolish inheritance tax. Is it a pre-election giveaway? Is it red meat for the blue wall areas? Is it red meat for the rich? I think so, I really do. The impact of halving or getting rid of inheritance tax will fall upon only one section of society, and that is the less well-off. The richest people are where this policy is focused. The richest people in society will benefit from the abolition of inheritance tax.
As my hon. Friend the Member for Hemsworth said, if we get rid of inheritance tax, we are talking about a loss to the Treasury of £7 billion. What could any MP in this debate do with £7 billion in their constituency? How many hospitals could we build nationally for £7 billion? Forget about repairing schools; how many could we build with £7 billion? How many youth clubs could be built with £7 billion? It could be used to look after ordinary people, in ordinary communities. Seven billion pounds—it is a lot of money to lose.
Inheritance tax has a long history. Contrary to what many people believe, it is not a modern tax created by crazy lefties. The first tax on the administration of a deceased person’s estate was the probate duty imposed by the Stamp Act of 1664. The roots of the modern version of inheritance tax can be traced to the estate duty created by Chancellor William Harcourt’s Budget of 1894. There has long been an acceptance that, when the wealthiest in our society die, the transfer of their wealth should not benefit only their heirs—as has already been said, they have done nothing at all to earn that wealth. Part of that wealth should also benefit communities and the country as a whole.
Inheritance tax is paid on estates worth more than £325,000. I think each speaker has mentioned this—forgive me for repeating it, but it is important—but if the main residence of the deceased is left to a descendant child, the value of that home is not included in the value of the estate and, when the entire estate is left to a spouse, no inheritance tax is paid.
Very few people pay this tax. In the tax year 2022-23, 3.73% of estates paid inheritance tax—3.73%—and only 1.9% of those estates that had to pay inheritance tax were in the north-east of England.
Jon Trickett
Out of the 29 constituencies in the north-east of England, only three paid a penny of inheritance tax in that last tax year. Does my hon. Friend think that cutting inheritance tax will put massive amounts of additional resources into his region?
Ian Lavery
I will come on to that, but as ever, my hon. Friend makes an extremely important point.
After Northern Ireland, the north-east of England pays the least, but have a guess where 42% of the estates that attract inheritance tax are located—have a guess, Sir Robert. They are here in London and the south-east —the blue areas. [Interruption.] I am sorry; if the hon. Member for Broadland (Jerome Mayhew) wants to intervene, I am happy to accept an intervention. Does he want to intervene?
Ian Lavery
He is chuntering away, so I just wondered whether he wanted to come in.
It is amazing how inheritance tax can be avoided. The biggest exemption, of course, is the nil rate on leaving everything to a spouse. Other exemptions include transfers to qualifying charities or registered clubs, and lifetime gifts given within seven years before death—this one is interesting: wealthy grandparents use it as tax relief on paying their grandchildren’s private school fees. Another exemption is business property relief, which allows no inheritance to be paid on the transfer on death of shares in a business that is not quoted on the stock exchange. Many of those shares are in valuable family firms. Agricultural land also often passes tax-free. Debts owed by the deceased can be deducted from the tax bill.
Ian Lavery
I will in a minute.
This one is absolutely unreal: the largest landowner in Northumberland donated a painting in lieu of tax. In 2015, the largest landowner in Northumberland avoided a £2.8 million inheritance tax bill by leaving a Van Dyck to the Bowes Museum. In that family’s property—it is not a terraced house, you know—they now have one less picture hanging on the wall for his heirs, but there is also almost £3 million less that could have gone to help poorer families in my constituency. I divvent care what anybody thinks; that’s not fair, man. It is not fair at all.
It is unreal to think that the wealthiest can avoid inheritance tax by giving a painting instead. How many people who have personal tax issues can say, “Look, if I give you a book, is that all right?” Of course it is not all right, man. It is one rule for the rich and another for ordinary working people who work hard and pay their taxes.
Peter Gibson
I am grateful to the hon. Gentleman for giving way. I particularly wanted to intervene when he was talking about business and agricultural property relief. Does he agree that the survival of many farms and family businesses relies on the fact that they are not taxed at the point of death?
Ian Lavery
I would not dispute that that is the case.
But let me get back to the political issue. This is pure politics. It is simple: it is about red meat. The Conservatives, through the press, support the myth that abolishing inheritance tax will somehow have an impact on ordinary people in communities because some people have their own houses. I have already explained that very few working-class people in communities right across the country will actually be impacted if we continue with this. Leaving properties to children, especially in areas with high property values such as London, makes a huge difference.
This will benefit wealthy people in electorally vulnerable blue wall seats. Seventy-five per cent of the top 60 seats in which inheritance tax has been paid are held by Conservative MPs, mostly here in the south. It will help the families of the wealthy Conservatives, such as the Prime Minister. That is why I oppose this measure. Inheritance tax is a means of lessening inequalities and mitigates against gross amounts of unearned wealth going to the children of the wealthy—children who did absolutely nothing to create that wealth. Most of the money saved from cutting or abolishing the tax will go to benefit wealthy areas in the south. It will do nothing to help people in Wansbeck, Hemsworth, Easington or Coventry —nothing at all. There would be less money for their health, less money for their education and less investment in the infrastructure that all the areas I have mentioned badly need. Our social mobility statistics in Wansbeck are some of the lowest in England, but instead of doing something to increase my constituents’ life prospects, the Conservatives are spending their time planning on how to give more money to the already wealthy.
The few very rich families in Northumberland, with all their large agricultural assets, pay less inheritance tax than they should now, while thousands are still using food banks and claiming benefits just to survive. Instead of cutting or abolishing inheritance tax, the rate should be increased and the exemptions eliminated to help to alleviate the current obscene gap between the rich and the poor. Public services are in tatters and councils are going bust left, right and centre. Taxing those who can afford it most is one means of alleviating the horrendous damage that this Government are doing to the social fabric of communities like mine up and down the UK.
Zarah Sultana (Coventry South) (Lab)
It is a pleasure to serve under your chairmanship, Sir Robert. I congratulate my hon. Friend the Member for Hemsworth (Jon Trickett) on securing this important debate.
For the vast majority, the past few years have been a time of unprecedented economic pain. Bills have rocketed, the supermarket shop is getting more and more expensive and, for so many, keeping their houses warm is unaffordable. Families are struggling to keep a roof over their heads and food on the table. Constituents in Coventry South and across the country are having to choose between heating and eating. The Office for Budget Responsibility says it is the biggest hit to living standards since records began. Yet while it is a cost of living crisis for many, things have never been so good for the wealthy few.
In the past decade, Britain’s billionaires have seen their wealth go up threefold. It now stands at £684 billion. The 50 richest families in the UK have more wealth than the bottom half of the population. As I have said many times before, the problem is not that there is not enough wealth in this country; it is that the super-rich have hoarded all the wealth.
That brings me to today’s topic. While the majority are struggling like never before, the wealthy few have never had it so good. It is reported that the Conservative Government want to introduce a tax cut that would overwhelmingly benefit the very richest. Roughly 5% of deaths result in inheritance tax being paid, and according to the Institute for Fiscal Studies, abolishing this tax would hand the richest 1% of estates more than £1 million each. Another study found that it would disproportionately help people in Conservative-held constituencies, particularly in the south-east and London. It is therefore little surprise why that is the tax Tories want to slash, in a move that would cost the public purse almost £15 billion by 2030.
Slashing taxes for the richest and squeezing incomes for the rest is the opposite of what we should be doing, but there is another way to go about it. We could tax the richest and fund our schools and hospitals. An annual wealth tax of just 1.5% on assets over £10 million, for example, would raise about £12 billion a year. Equalising capital gains tax with income tax rates would raise another £15 billion a year. Introducing a windfall tax on bank profits could raise £20 billion in a year—I hope the Minister is making notes; these are good suggestions. Ending the nom-dom tax break for the super-rich would raise a further £3 billion. That is money that could be invested in our communities, reversing Tory austerity and rebuilding our crumbling services. This failed Tory Government have failed to do this and will not do it for the remainder their time, but it must be the mission of the next Labour Government.
Jim Shannon (Strangford) (DUP)
It is a pleasure to serve under your chairship, Sir Robert. I first thank the hon. Member for Hemsworth (Jon Trickett) for securing this debate and giving us all the chance to participate. It is no secret that my politics are left of centre, and I very much have a social conscience about these things, but I have to say honestly to Opposition Members that perhaps it is time we disagree. Hopefully, they can appreciate my point of view, which I will explain. The hon. Member for Darlington (Peter Gibson) made it very clear in his contribution where he stands, and that is where I also stand. Opposition Members always have been and always will be good friends of mine, but I am on a different page to theirs on this one.
I welcome the opportunity today to make a strong case for why inheritance tax should be abolished in the United Kingdom of Great Britain and Northern Ireland. Inheritance tax is a levy imposed on the estates of people when they die, and I believe it is one of the most unfair taxes in existence. That is my opinion, and I hope others will respect it. Inheritance tax punishes a lifetime of hard work, discourages saving and creates inequality. It goes against the very principles of meritocracy, aspiration and family, and I believe it needs to go.
I will tell a story, and it is not because I want to boast in any way. My dad will be dead nine years this March, and when my mummy and daddy got married, he started with £5. My dad was very talented; he was very good with his hands and he could turn them to anything. He fixed a cartwheel and sold it for £5, and that £5 got mum and dad married—my mum is 92, by the way, so this was a long time ago. My point is that dad then progressed, through four or five shops, from western Tyrone right through to Ballywalter, Millisle, Newtownards and back down to where we now have farm. I can tell hon. Members that mum and dad got that farm through hard work, through the sweat of their brow, and through their efforts to try and do something, starting with £5. That story is gospel truth, and perhaps it illustrates where I come from. I think it is about working hard and having a hard-working ethic.
I say this with great respect to Opposition Members, because I know that they have a work ethic as well—it is not about that. I just want to explain that my dad did what he did, and got to where he was, through those efforts. My father is now dead and gone, but that effort has been replicated by hundreds of thousands of people across this great United Kingdom of Great Britain and Northern Ireland. I believe we must address the fundamental principles that underpin our economic system. The accumulation of personal wealth through hard work, dedication and innovation is the basis of a thriving economy. In its current form, inheritance tax undermines that very principle by placing a significant burden on individuals who wish to pass on their accumulated assets to their loved ones.
I am not sure when I will pass away—it may be soon or it may be some time away, but whenever it is, I am ready to go, and I know where I am going—but I will wish to pass on what I have to my three boys. My will has already been made and that decision is done, because that is what I have worked hard for over all these years. Abolishing inheritance tax would allow families to retain the fruits of their hard labour, enabling the transfer of their hard-earned property from one generation to the next without any undue interference from the state.
I come from a farming background. I live in the farmhouse on my farm, and I will quote the old saying, “A father farms for his sons” or his daughters. A father does so in order to pass to the next generation a work ethic and whatever has rightly been earned from that work. If there is one reason to work hard and save wisely, surely it is doing so for one’s own family. I believe that inheritance tax punishes people, and many hundreds of thousands of others have the same opinion.
Inheritance tax is ineffective and inefficient. It raises a small amount of revenue for the Government but imposes a high administrative and compliance burden on taxpayers and their families. According to the Institute for Fiscal Studies, inheritance tax currently raises £7 billion per annum and will reach some £15 billion by 2032-33. However, that is only 0.5% of GDP, and it comes at the cost of complex rules, loopholes and avoidance schemes.
My mum and dad had a clear work ethic. I remember my mum taking me down to Northern Bank with £10 when I was 16, so that I could open a bank account. I am still with the bank, having received a £10 contribution from my mum to get me started. She instilled in me and my family a willingness to save for what we want and for what we need to get for our houses on so on.
Inheritance tax distorts economic behaviour, as it discourages people from saving and investing. Instead, it encourages them to spend or give away their possessions before they die, which I think is not entirely correct. Critics argue that abolishing inheritance tax may increase wealth inequality, but I do not believe that. It is essential to recognise that the tax affects not only the wealthy but many middle-class families, who may be asset rich but cash poor. That is the way I see it. In the area where I live, most families are middle class, and they express the same concerns that I am expressing today on their behalf.
Forcing families to liquidate assets to pay inheritance tax can result in the sale of family businesses or properties, leading to economic instability and job losses. Abolishing the tax would protect family-owned enterprises and allow for the preservation of businesses that contribute to local communities. Inheritance tax is unfair and inequitable. It hits people with different levels of wealth and different types of assets in different ways. The very wealthy effectively pay a lower rate of tax than the moderately wealthy, as they can use trusts, gifts and other legal devices to reduce their liability. I understand that and, to be fair, the hon. Member for Hemsworth referred to it earlier. I cannot say that people are abusing the system because, by its very nature, the system lets people find loopholes.
Inheritance tax violates the principle of double taxation, because it taxes people on income or savings on which they have already paid tax during their lifetime. They have already paid tax, and then they have to pay it again. That is not right. Inheritance tax also violates the principle of autonomy, as it restricts a person’s freedom to dispose of their property as they wish—the freedom to give what they own to their children or grandchildren, or to a charity.
I honestly see the tax as wholly un-British because it goes against the values of the British people who have traditionally believed in rewarding hard work, supporting family and achieving social mobility for the next generation. That is what I believe in my heart. We should always work to make the next generation better off than the previous one. That is why I have a social conscience. I am not saying that nobody else has a social conscience, but that is why my politics lie left of centre. I will always fight for the wee man and the wee woman to make sure that they have rights.
However, I cannot go along with what was proposed in the debate. Inheritance tax is consistently rated as the most hated tax in the country. There is a strong public demand for its abolition. I have no idea what the Minister will say, but if he says that inheritance tax will be abolished, I will cheer and I suspect the hon. Member for Darlington will do likewise. There might be others of the same opinion. It is 330 years since its inception in 1694—a long time to have a tax in place. There have been many changes in how we look at things today and differences in wealth dispersion, not just among those who are very wealthy but among the middle classes. My daddy and mum started off with £5 when they got married.
It is time to re-evaluate the tax. It seems to penalise success and undermine the family. I am a great believer in the family being the core of society. It is time to respect the wishes of the people who have worked hard to earn what they have and let them decide how to use it for the benefit of themselves and their loved ones.
David Linden (Glasgow East) (SNP)
It is, as ever, a great pleasure to serve under your chairmanship, Sir Robert. I thank the hon. Member for Hemsworth (Jon Trickett) for securing the debate, which has been quite informative and good-mannered. I pay tribute to my colleague and comrade, the right hon. Member for North East Hampshire (Mr Jayawardena), who I am sure was here to advocate a 5% inheritance tax.
I also pay tribute to the hon. Members for Darlington (Peter Gibson), for Easington (Grahame Morris), for Wansbeck (Ian Lavery), for Coventry South (Zarah Sultana) and for Strangford (Jim Shannon). It is not often that I disagree with the hon. Member for Strangford. He knows that I hold him in high esteem. But to gently push back on his argument, I suggest that perhaps his parents started with only £5 because of the inequality that exists. Perhaps if inheritance tax was properly in place, his parents might have had more money.
Jim Shannon
Perhaps I did not make my point in the right way. My mum and dad started with £5. They worked hard, developed all those shops and the farm that they owned through hard work and effort. What I am trying to say—I hope I can convey it in a sensible way—is that with that hard work ethic they made their £5 go far. It is like the story in the Bible of the 10 talents. They got 10 talents and a whole lot more.
David Linden
I appreciate that. Anyone watching this debate will know that, given how we are debating this, some of which is based on Bible principles, this is just something that we will disagree on. I none the less appreciate how the hon. Member put his point and I respect it.
I have listened with great interest to the points made by Members today. As we approach the spring Budget, I suspect it will not be the last fiscal event of the year if we are heading for an autumn election. As with last year’s autumn statement, I am sure that the issue of inheritance tax—we got to the crux of this with the contributions from the hon. Members for Darlington and for North East Hampshire—or more specifically the issue of scrapping inheritance tax, will feature heavily in the debate leading up to the Chancellor’s announcement this spring.
As we debate this issue it is important to be cautious and take stock of who this debate favours and at what cost. Who are the winners and losers? I appreciate that, in the cosy consensus of Westminster, talking about the royal family is not often appreciated, but there is an elephant in the room here: there is no inheritance tax for the royal family. Indeed, recently, the King, following his mother’s passing away, benefited enormously from inheriting the Duchy of Lancaster, and his son benefited enormously from inheriting the Duchy of Cornwall. Neither of them paid any inheritance tax—we are talking about hundreds of millions of pounds being inherited by the King and the Prince of Wales, and not a single penny of inheritance tax being paid on that. I am at risk of upsetting either the Clerk or you, Sir Robert, so I will not make any more comment on that, but simply leave it on the record that my constituents and I find the situation deeply unacceptable.
Just last week, I stood in this Chamber outlining the dire situation that people currently face as a result of the cost of living crisis—a crisis that shows no real signs of improving any time soon. As I go around my constituency of Glasgow East and people talk, quite rightly, about the impact of the cost of living crisis and the upcoming Budget, not a single constituent who has spoken to me in person, emailed me or come to my surgeries has said, “Do you know what, David? The biggest solution to the cost of living crisis is to abolish inheritance tax.”
I suspect that if we challenge people on the issue of polling and go out there—whether to Westminster tube station, Hemsworth or Worcestershire—abolishing inheritance tax will be so low down in people’s priorities. That is why, in the midst of this cost of living crisis, debating whether to scrap inheritance tax—which less than 5% of people pay, despite bringing in nearly £7 billion to His Majesty’s Revenue and Customs—seems ludicrous. Against the backdrop of a British Government intent on bringing forward draconian measures to force ill and disabled people into work in order to balance the books, it is ludicrous that they are floating the idea of scrapping an inheritance tax that is paid by only the wealthiest households on these islands.
However, the British Government’s commitment to reducing taxes for the most well-off is a timely reminder of just how out of touch they are. As people struggle to turn on the heating this week in -4° conditions, it is simply absurd that the British Government should be even considering getting rid of a tax that goes at least some way, albeit a very small way, to alleviating the entrenched wealth inequality that is so prevalent in our society. The UK has one of the highest levels of income inequality in Europe, so scrapping or even reducing inheritance tax only deepens further the chasm of inequality that no modern or fair society should have.
Fuelling speculation around the scrapping of inheritance tax, the Chancellor has previously stated:
“I think that inheritance tax is a pernicious tax because one of the main reasons people invest is because they want to pass on savings to their children”.
Inheritance is an emotive subject of debate. It makes us consider life after we are no longer here and what that may look like for the generations after us. This is where my friend the hon. Member for Strangford and I entirely agree: we both know where we are going after we have been here, because of our belief in Jesus. I also happen to believe that people should not have a removal van or a bank van following them to their grave, but that is a separate issue.
As a parent myself, I understand the logic of wanting to be able to provide for our children, even from beyond the grave, but here is why I take that statement and the Chancellor’s line of argument with a degree of incredulity. I recently—in fact, only yesterday—spoke with Daniella Jenkins, a senior lecturer at the University of Bristol, who made an important point about recognising the existing inequality of intergenerational wealth. Like the hon. Member for Darlington, the Chancellor made a sweeping statement without giving any consideration to what I would argue are the huge disparities in intergenerational wealth that exist across these islands.
Pre-existing parental wealth is often overlooked in this debate. It is worth noting that while some children are set to inherit from their parents, some stand to inherit absolutely nothing, either because they do not have any parents or because their parents themselves face dire levels of income inequality, meaning that they will have little to leave behind. Sadly, that issue is probably more the case in constituencies such as mine, Glasgow East; I respectfully suggest that perhaps that is why I bring to the debate a different view from that of my friends on the Conservative Benches.
Although the Chancellor frames his argument around the desire to transfer wealth to children, we cannot escape the fact that the national trends across the population show that parental wealth is very, very unequally distributed. We should also remember that the value of wealth being passed on has also increased over time. If that cycle continued, it would only further entrench wealth inequality among millennial children and younger children, because—frankly—the difference between having rich parents or poor parents is now shaping what economic resources are available to children. That is why it is so important that the discussion about inheritance is centred on fairness and equality.
In Scotland, the issue of taxation has been under intense scrutiny over the last few months, following the Scottish Government’s latest reforms to their progressive tax framework. Only today the Prime Minister spoke about Scotland being the highest-taxed part of the United Kingdom. I am afraid that is not something that keeps me awake at night. As a higher earner, I am quite happy to pay more tax, because the tax that I pay goes towards the education that my children receive at the local school; the tax that I pay goes towards the salary of my mother, who works in the national health service. As a higher earner, I have no issue whatever with paying more tax, although I know that view is not shared widely in this place.
Although the Scottish Government currently have no ability to introduce measures related to income tax, within their income tax framework they have been able to create a progressive tax system conducive to a fair and more prosperous Scotland. With the limited powers that they have, the Scottish Government have ensured that the tax and social security system is progressive and equitable, so that everybody in Scotland—regardless of their background—has the opportunity to thrive. It is within those guiding principles that progressive policies have resulted in Scottish households, particularly in the lower half of the income distribution bracket, being £400 better off a year than they would be in other parts of the UK.
While we are faced with these elevated levels of income inequality, scrapping or reducing inheritance tax would simply deepen and perpetuate the existing disparity. If the British Government are determined to make an already deeply unfair inheritance tax system more unfair, the only conclusion that I can draw is that they must transfer the necessary powers to legislate on inheritance tax to the Scottish Parliament, either through the means of further devolution or—my desired option—independence. Only then will Scotland be able to build a comprehensive and progressive tax system that puts fairness and equality at the centre, representing the values of a modern and equitable society and not those of a Westminster system that frankly does not have the confidence of the people of Scotland.
James Murray (Ealing North) (Lab/Co-op)
It is a pleasure to speak in this debate with you as the Chair, Sir Robert.
I begin by congratulating my hon. Friend the Member for Hemsworth (Jon Trickett) on securing this debate. I am pleased to respond to it on behalf of the Opposition, following the contributions of Members from right across the House, including those of my hon. Friends the Members for Easington (Grahame Morris), for Wansbeck (Ian Lavery) and for Coventry South (Zarah Sultana).
Any debate about tax in this country must begin by recognising that under the Conservatives the tax burden is set to be the highest since the second world war. We have seen 25 tax rises in this Parliament alone and the decisions taken by this Government will leave the average family £1,200 worse off. No wonder the Prime Minister and the Chancellor are feeling pressure to cut taxes. However, the problem for them is that the average family will still be £1,200 worse off even after the recent national insurance cuts. Indeed, the Conservatives have put up taxes so much that there is now nothing they can do to repair the damage they have done to the economy and to family finances.
The truth is that the personal tax rises introduced by this Government will far outweigh any relief arising from their recent change to national insurance. Even taking this year in isolation, many of those on lower incomes will see their taxes rise. Consequently, with a general election approaching, we can expect the Conservatives to get more and more desperate, and—frankly—more and more reckless, in what they are prepared to throw at holding on to power. The Opposition will always stand with working people; that is why we have made it clear that we want the tax burden on working people to come down. We are also always clear that, unlike what we have seen from the Conservatives during this Parliament, we will always set out exactly how we would pay for any tax cuts.
As the 6 March Budget approaches, we are again beginning to hear rumours that the Prime Minister and Chancellor are considering abolishing inheritance tax, as they feel growing pressure to assuage their Back Benchers and members. All parents have a natural desire to pass on to their children what they have worked hard for in life, but the truth is that an inheritance tax cut would benefit only the top few per cent. of estates. In the middle of a cost of living crisis, when families across Britain are struggling and our public services are on their knees, that cannot be the right priority.
According to figures from HMRC, in 2020-21 only 3.7% of estates paid inheritance tax, while the Institute for Fiscal Studies suggests that the cost of abolishing the tax would be £7 billion. The IFS also notes that about half the benefit of abolishing inheritance tax would go to those with estates of £2.1 million or more, who make up the top 1% of estates and would benefit by £1.1 million on average. Given the state of public finances and services, that simply cannot be justified as a priority when taxes for working people are already so high and set to keep rising.
Peter Gibson
I am very interested to hear what the hon. Gentleman has to say about hard-working families. Will he outline how much those hard-working families would be hit by his party’s plans to borrow an extra £28 billion each and every year?
James Murray
I thank the hon. Member for his intervention, but, as we have set out, all our plans are within our fiscal rules. Frankly, that was the hon. Member’s attempt to distract from the fact that he is a member of a party presiding over a Parliament that has put up taxes 25 times and is on track to have the highest tax burden since the second world war. There is simply no getting away from that record and from the burden that his party has increased on working people during this Parliament.
Peter Gibson
I am grateful to the hon. Gentleman for giving way again; he is being incredibly generous with his time. I am incredibly proud of my party and the track record of what it has delivered for our country over the past few years: the incredible support given throughout covid and to working families up and down the country through the cost of living crisis.
James Murray
Frankly, I think that an increasing number of people across Britain would disagree. The one question that they are going to be asking themselves as we approach the next general election is: am I and my family any better off than we were 14 years ago? Is anything working better or in a better state in this country than it was 14 years ago? The answer to that question is a resounding no.
James Murray
I see the hon. Gentleman gesturing, but I have given way twice; I am going to make a bit of progress before taking any more interventions.
We are not concerned just that inheritance tax would be the wrong priority; we are also concerned about the damage that the Government might do to our economy if the tax cut were unfunded. People across Britain will remember the chaos unleashed by the disastrous mini Budget, when the previous Prime Minister and Chancellor promised irresponsible unfunded tax cuts for the wealthiest. I ask the Minister: how would the Government pay for the £7 billion abolition of inheritance tax that it appears they are briefing the media about?
Which of our public services would see their funding reduced? What other taxes would the Government expect to increase? What investment in our future would they plan to cut and how much more do they want to push up debt? I would welcome it if the Minister were upfront about what the Government are considering. If they are not considering abolishing inheritance tax, they should say so now.
Perhaps, though, it is unfair to ask the Minister to be clear about what the Government are thinking, as the Prime Minister and Chancellor may, in all honesty, not know what to do. The Conservatives need to call an election in the next 12 months and they know that they are out of options when it comes to what to say. After 14 years of Conservative government, public services have been run into the ground, the economy has stagnated and the tax burden is set to be at its highest in generations. Yet what we hear from their briefings to the media is speculation that they want to cut inheritance tax—something that would benefit the top 4%, while taxes on working people keep rising. That is the wrong priority when both public and household finances are so stretched.
What the country needs is a Labour Government with fiscal responsibility at their heart and a plan to reform public services while growing the economy. That is the way to make people across Britain better off.
The Financial Secretary to the Treasury (Nigel Huddleston)
It is a pleasure to serve under your chairmanship, Sir Robert. I join others in congratulating the hon. Member for Hemsworth (Jon Trickett) on securing this debate. I also welcome the participation of other colleagues, in particular my hon. Friend the Member for Darlington (Peter Gibson), the hon. Member for Easington (Grahame Morris), my right hon. Friend the Member for North East Hampshire (Mr Jayawardena), the hon. Members for Wansbeck (Ian Lavery), for Coventry South (Zarah Sultana) and for Strangford (Jim Shannon) and my opposite numbers.
We have had a wide-ranging debate. Everybody knows, and the Government certainly recognise, that individuals do work hard to build up assets over their lives, and it is a very human instinct to want to pass that on to their loved ones, when they pass away. Yes, there has recently been a great deal of speculation in the media and on Opposition Benches about potential future changes to inheritance tax.
I am sorry to disappoint hon. Members and colleagues, although they will not be surprised to hear that I am not going to announce Government policy here today. The Budget is on 6 March, when the Chancellor of the Exchequer will set out any changes to the tax system in the normal way. There is a great deal of speculation and it would be inappropriate for me to comment.
David Linden
Could the Minister confirm something for us? We hear the argument all the time that Ministers will not speculate and that the announcement will be made in the Budget. The blunt reality, however, is that, whether it is speeches at the Conservative party conference, op-eds in The Sun newspaper, or cosy sit-downs with political journalists, the Government do comment on what they are doing before the Budget, do they not?
Nigel Huddleston
The hon. Member will be aware from his own party and the Opposition that there is a wide range of views within parties on policy. I am not going to speculate on tax policy. We always keep tax policy under review and always welcome insights, evidence, information and views when developing tax policy, as do the Scottish Government. We have heard a wide variety of views today. As I said, announcements will be made at the appropriate time and place.
Peter Gibson
Does this not clearly illustrate the distinction between those of us on this side of the House who would love to see inheritance tax reduced and ultimately abolished, and those Members on the other side who only want to tax working people more?
Nigel Huddleston
My hon. Friend makes an important point. We saw that in the recent autumn statement with the national insurance cuts. Our instinct and wish as Conservatives is to lower taxes, wherever appropriate and possible. We are also responsible with public finances and recognise that every single penny of Government spending is paid for through taxation, either immediately or in the future as deferred taxation—that is, borrowing money. We need to, and do, respect every single penny, because it is the public’s money, not Government money, that we are spending. Taxation is an important issue, and I am glad we are talking about it today. I am confident that it will be a major topic in the run-up to the election.
The Government support wealth creation but also understand the importance of ensuring that wealthy individuals make a fair contribution and pay tax appropriately. We do not have a specific wealth tax, as some other countries do, but if we look at the facts, it is clear that the Government do tax wealth, in a number of ways that generate substantial revenue, while remaining fair. For example, OBR forecasts for 2023-24 indicate that we can expect inheritance tax revenues of about £7.6 billion, capital gains tax revenues of £16.5 billion and stamp duty tax revenues of about £13 billion.
We also have a progressive income tax system, so that the top 5% of income taxpayers pay about half of all income tax. The top 1% is projected to pay about 28% of all income tax. It is also important to stress that in 2010, under the previous Labour Government, the top 5% accounted for 43% of income tax and the top 1% for 25%. Therefore, the system under the Conservatives is more progressive.
Grahame Morris
The Minister is putting forward an interesting proposition about progressive policies and taxation. Has he had a chance to consider whether council tax is a progressive form of taxation, when a millionaire, living in a £20 million property in Belgravia, very close to this place, pays less in council tax than my mother in a terraced colliery house worth about £50,000 in Murton?
Nigel Huddleston
The hon. Member needs to recognise that tax needs to be taken in the round. There is a variety of taxations—on income, wealth and other areas. Taxation is a broad topic, and individual taxes affect people differently. The hon. Member for Glasgow East (David Linden) made the point about inequality as well, but it is important to remember that, on average, households in the lowest income decile receive over four times more in public spending than they pay in tax. Nobody doubts the importance of a progressive tax system; my point was that the Opposition often try to make out that the tax system was more progressive under them, but it was not. The facts make that incredibly clear.
Nigel Huddleston
If the hon. Member will give me a moment to proceed, I will allow him to come in later, because I have other points to make in response to some of his comments.
Inheritance tax is a wealth transfer tax and applies to the estate of the deceased. Transfers made in the seven years before death are also taken into account. The estates of all individuals benefit from a £325,000 nil-rate band, and the targeted residence nil-rate band is a further £175,000 available to those passing on a qualifying residence on death to their direct descendants such as children and grandchildren. That means that qualifying estates can pass on up to £500,000, but the qualifying estate of a surviving spouse or civil partner can pass on up to £1 million without an inheritance tax liability. That is because any unused nil-rate band or residence nil-rate band is transferable to a surviving spouse or civil partner.
Peter Gibson
Could the Minister specifically address the point I made about the inherent unfairness to those who do not or are unable to have children, in respect of the nil-rate band that applies to them?
Nigel Huddleston
I thank my hon. Friend for his comments. Again, I cannot make any promises today, but I understand the important point he is making about the nil rate. Changes have been made over the years in that area, and I will come on to that point later.
The vast majority of estates pay no inheritance tax. The combination of nil-rate bands, exemptions and reliefs mean that only 5.1% of UK deaths are forecast to result in an inheritance tax liability in 2023-24. That is forecast to increase slightly to 6.3% in 2028-29: it is still a relatively small number, but it makes an important contribution to the public finances. It is forecast to raise £7.6 billion in 2023-24 and £9.9 billion in 2028-29. That revenue is important because it is spent on a whole variety of public services, levelling up and many other areas of Government policy.
The headline rate of inheritance tax is 40% but, as the hon. Member for Wansbeck acknowledged, a 36% rate is charged when at least 10% of the net estate is left to charity. That is an important point of this system as well. It is important to remember that the rate is charged on the part of the estate that is above the threshold and after the application of reliefs and exemptions.
The Government have made changes since 2010 that have increased the threshold to £1 million, made the system fairer and reduced administrative burdens. For example, in 2017 the Government introduced the residence nil-rate band, mentioned by my hon. Friend the Member for Darlington, to make it easier to pass on the family home to the next generation, but we restricted the residence nil-rate band for the wealthiest by tapering it away for estates over £2 million. More recently, we made changes so that for deaths from January 2022, over 90% of non-paying estates each tax year no longer need to complete inheritance tax forms when probate or confirmation is required. At the same time, we have tightened the rules to make sure that individuals make a fair contribution and pay the tax owed. For example, in 2017 we introduced new rules to limit abuses of the rules by people with non-domicile status who used complicated structures to make their UK homes look like offshore assets.
Several hon. Members talked about loopholes and avoidance. It is important to distinguish between the legitimate use of reliefs and those who engage in avoidance by bending the rules to gain a tax advantage that Parliament and none of us ever intended. It is not true that the wealthiest do not pay inheritance tax: national statistics for the tax year 2020-21 show that taxpaying estates valued at over £1 million accounted for 81% of the total inheritance liability.
David Linden
If it is not true that the wealthiest do not pay inheritance tax, can the Minister tell us how much the King paid upon inheriting the Duchy of Lancaster?
Nigel Huddleston
As I said, estates valued at over £1 million paid 81% of all inheritance tax.
I am aware of the time, and I need to leave a minute or two at the end for the wind-up, but I want to make a final point. We have had a very good discussion about inheritance tax, but we have had an inkling of the differences between the political parties. I am afraid that some Opposition Members started to delve into the politics of envy, which is a well-trodden path for the Labour party, by commenting on elitism, Oxford University and so on. Well, I can tell them that I went to Oxford, and that my Labour-voting trade unionist father, my mum, who worked on the tills at Asda, and the schoolteachers at my comprehensive, instead of being snide about the opportunities and aspiration that I had, actually applauded and supported social mobility. That is what we on the Conservative Benches do. It is disappointing to hear the tone of the Opposition.
The hon. Member for Ealing North, in another well-trodden argument, started trying to lecture us on responsible finances. We still have not had an answer to the question of where the £28 billion of spending promised by the Opposition would come from. We are more than happy to debate the issue, because we have a very clear plan for the economy: we had the very welcome and well-received national insurance cut at the autumn statement, which I do not believe the hon. Member opposed, and nor did he oppose the significant support that we gave during covid or the significant support that we have given households during the cost of living crisis. That all needs to be paid for, which is why we have higher taxes than we would like. But we are on a path to reducing them, because that is what Conservatives do. I thank hon. Members for their contributions; all their comments have been taken on board.
Sir Robert Syms (in the Chair)
I call Jon Trickett to make a brief winding-up speech.
Jon Trickett
I will be very brief. “The politics of envy”—talk about predictable. What we have actually heard from Government Members is a politics of wealth, privilege and greed. We have a tax system that simply reinforces the gross inequalities in our society, as we have heard from almost every Member, including the hon. Member for Strangford (Jim Shannon) and a couple of Members on the Government Benches. We have a system that is grossly unequal, deeply unfair and unjust, and the system of so-called inheritance tax reinforces all that. The Minister has refused to deny that the Government are looking at inheritance tax. We look forward to the announcement on 6 March, and we hope that the Government will listen to the points that we have made.
The Minister did not respond to the two central points that I was trying to make. First, inheritance tax is paid by a tiny minority of people who are based largely in Conservative-voting seats; that tells us exactly what fears are in the bellies of the Ministers who are trying to pump money into Tory areas to try to protect their majorities. It will not work. Secondly, to respond to the hon. Member for Strangford, who is no longer in his place, this issue is about the big estates. It is not about somebody who has built wealth through hard work with their hands; it is about entrenched estates that have been there for centuries, right back to the Domesday Book—estates that the Minister’s party protects and that presumably fund his party, too.
Let me finish with the words of a man who was alive at the time of Christ, the philosopher Seneca: “A kingdom founded on injustice will not survive”. This year, whenever the election is, we will see what exactly will happen to the kingdom of injustice that the Conservatives have created.
Question put and agreed to.
Resolved,
That this House has considered inheritance tax.