'Coast clear' for inheritance tax cut in Autumn Statement - former Treasury boss

Chancellor Jeremy Hunt  (PA Wire)
Chancellor Jeremy Hunt (PA Wire)

Chancellor Jeremy Hunt has the “coast clear” to cut inheritance tax, according to a former Treasury boss.

Lord Macpherson suggested that the political benefits of easing this levy may outweigh the economic costs.

The peer tweeted that inheritance tax is a tax which raises around £7 billion but that “many mistakenly think they will pay it. Hence the political return from cutting it is higher than the cost”.

He stressed that In 2021, 27,000 estates (3.7% of deaths) paid it and in 1939, 153,000 estates did, with the top rate then being 50% compared to 40% now.

Lord Macpherson, Permanent Secretary at the Treasury from 2005 to 2016, added that “the political appetite for taxing capital” may have changed over the decades, with inheritance possibly previously seen as “arbitrary and lucky and counter to equal opportunity” but now it may be regarded “as a right”.

Recalling his days in the Treasury, he explained: “Brown and Darling thought there was little money in it and thought it best left alone.”

He added: “Tory Chancellors have also been reluctant to change its system of bizarre reliefs and high rates, making the incidence of the tax appear unfair.

“And so the coast is clear for Mr Hunt to cut a relic from a more egalitarian age, though even this hard-bitten former HMT official would feel a little queasy if he combines a cut which unambiguously helps the wealthy while cutting (in real terms) the benefits of the poor.”

Mr Hunt refused to rule out the measure in a BBC News interview.

During a visit to the ITM Power manufacturer in Sheffield, he said: “In terms of tax cuts you’ll have to wait and see but I will say the priority is helping businesses like this to succeed.

“The best way that we can reduce the tax burden for everyone is to grow the economy.”

Mr Hunt’s decision will depend on latest predictions from the Office of Budget Responsibility, the UK's main economic forecaster.

A Treasury source said no final decision had been made and it is possible such a move is delayed until the spring.

Tory former chancellor Lord Clarke said it may please MPs on the right who are clamouring for tax cuts, but others would find it “appalling”.

Hunt could also squeeze benefits payments by billions in his autumn statement on Wednesday.

Typically ministers use the September figure for inflation when uprating working-age benefits, which would mean a 6.7 per cent hike.

But Mr Hunt has not ruled out using October’s far lower figure of 4.6 per cent.

Asked about the possible move in an interview with the BBC, the chancellor said: “We will always be a compassionate Conservative government but part of how we make our economy successful is by making sure companies like this company can find the staff they need.

“Nearly a million vacancies across the economy, so we do need to reform our welfare system.”