Andrew O’Brien is Director of Policy and Impact at Demos.
Despite heavy trailing in the run up to the Autumn Statement, Rishi Sunak and Jeremy Hunt decided not to go with a cut to inheritance tax. Naturally, attention is turning to a general election next year and the Spring Budget as a last chance to reset the political agenda.
Once again, calls are mounting for the Conservatives to promise to slash inheritance tax next year or even abolish it. But would this be a good idea?
Demos has been working on public attitudes towards inheritance over the past eighteen months, because inheritance is returning as a major economic and social force in British society; we are living in a ‘New Age of Inheritance’, where over £100bn is being transferred in gifts between generations every year.
If we are going to create a fair system for inheritance, we need to understand what the public really thinks. In our previous research, The Inheritance Tax Puzzle, we found that the public’s view on inheritance tax was more nuanced than is generally understood. Inheritance tax is unpopular (like many taxes) but the vast majority of people do think that some form of tax should be paid on inheritances.
Moreover, they recognize that if you cut or abolish inheritance tax, taxes are simply going to be raised somewhere else. Inheritance may be unpopular in isolation, but when you put it into context, people understand its necessity.
With all these rumours swirling around, Demos decided to conduct some polling on the public’s attitudes towards inheritance. The data tables, and further analysis of the data, can be found on the Demos website.
We asked people to consider tax on inheritance alongside other priorities such as funding the NHS and schools or reducing government borrowing. Part of the problem with the inheritance tax debate is that it is too often considered in isolation. No one can dispute that inheritance tax is unpopular, the real point is whether they think giving up on up to £7bn of tax revenue is a good idea in the current circumstances.
Unsurprisingly, given the current state of our public services, the majority of the public (57 per cent) want money spent on the NHS and schools rather than on abolishing inheritance tax. Only a fifth of those asked favoured abolishing inheritance tax. This was true across every category of voter, including people who voted Conservative in 2019. Interestingly, almost as many 2019 Conservative voters wanted to reduce government borrowing (25 per cent) as wanted to see inheritance tax abolished (28 per cent).
Given the current fiscal position, most people also think that abolishing inheritance tax would be irresponsible given the current economic climate. Four in ten people believe it would be irresponsible to abolish inheritance tax compared to one third who think that it would be responsible.
Crucially for the Prime Minister, he is more likely to improve his party’s favourability with the public by keeping inheritance tax and showing that he is putting as much resource as possible into public services. Our survey found that net favourability for the Conservatives would increase by 21 per cent if they spent an additional £7bn on public services, compared to an increase of just one per cent if they spent £7bn on abolishing inheritance tax.
As esteemed polling expert Sir John Curtice said at Demos’ party conference session on the road to the next election at Conservative Party Conference, the public would like tax cuts but only when public services have been fixed. Abolishing inheritance tax would be a £7bn electoral gamble which is unlikely to pay off.
Moreover, given the New Age of Inheritance, it would be a gamble with significant social and economic significance, likely to further decrease social mobility and make it harder for those from deprived backgrounds to get on in life. Electoral desperation is never a good place from which to make major decisions on the future of our tax system.
Sunak and Hunt were wise to avoid attempting abolish inheritance tax as central to their announcements at the Autumn Statement. They would be wise to avoid making it their pitch in the Spring Budget and the next general election. There are better, more cost effective, ways to show the Government is aligned to the public’s priorities.
Andrew O’Brien is Director of Policy and Impact at Demos.
Despite heavy trailing in the run up to the Autumn Statement, Rishi Sunak and Jeremy Hunt decided not to go with a cut to inheritance tax. Naturally, attention is turning to a general election next year and the Spring Budget as a last chance to reset the political agenda.
Once again, calls are mounting for the Conservatives to promise to slash inheritance tax next year or even abolish it. But would this be a good idea?
Demos has been working on public attitudes towards inheritance over the past eighteen months, because inheritance is returning as a major economic and social force in British society; we are living in a ‘New Age of Inheritance’, where over £100bn is being transferred in gifts between generations every year.
If we are going to create a fair system for inheritance, we need to understand what the public really thinks. In our previous research, The Inheritance Tax Puzzle, we found that the public’s view on inheritance tax was more nuanced than is generally understood. Inheritance tax is unpopular (like many taxes) but the vast majority of people do think that some form of tax should be paid on inheritances.
Moreover, they recognize that if you cut or abolish inheritance tax, taxes are simply going to be raised somewhere else. Inheritance may be unpopular in isolation, but when you put it into context, people understand its necessity.
With all these rumours swirling around, Demos decided to conduct some polling on the public’s attitudes towards inheritance. The data tables, and further analysis of the data, can be found on the Demos website.
We asked people to consider tax on inheritance alongside other priorities such as funding the NHS and schools or reducing government borrowing. Part of the problem with the inheritance tax debate is that it is too often considered in isolation. No one can dispute that inheritance tax is unpopular, the real point is whether they think giving up on up to £7bn of tax revenue is a good idea in the current circumstances.
Unsurprisingly, given the current state of our public services, the majority of the public (57 per cent) want money spent on the NHS and schools rather than on abolishing inheritance tax. Only a fifth of those asked favoured abolishing inheritance tax. This was true across every category of voter, including people who voted Conservative in 2019. Interestingly, almost as many 2019 Conservative voters wanted to reduce government borrowing (25 per cent) as wanted to see inheritance tax abolished (28 per cent).
Given the current fiscal position, most people also think that abolishing inheritance tax would be irresponsible given the current economic climate. Four in ten people believe it would be irresponsible to abolish inheritance tax compared to one third who think that it would be responsible.
Crucially for the Prime Minister, he is more likely to improve his party’s favourability with the public by keeping inheritance tax and showing that he is putting as much resource as possible into public services. Our survey found that net favourability for the Conservatives would increase by 21 per cent if they spent an additional £7bn on public services, compared to an increase of just one per cent if they spent £7bn on abolishing inheritance tax.
As esteemed polling expert Sir John Curtice said at Demos’ party conference session on the road to the next election at Conservative Party Conference, the public would like tax cuts but only when public services have been fixed. Abolishing inheritance tax would be a £7bn electoral gamble which is unlikely to pay off.
Moreover, given the New Age of Inheritance, it would be a gamble with significant social and economic significance, likely to further decrease social mobility and make it harder for those from deprived backgrounds to get on in life. Electoral desperation is never a good place from which to make major decisions on the future of our tax system.
Sunak and Hunt were wise to avoid attempting abolish inheritance tax as central to their announcements at the Autumn Statement. They would be wise to avoid making it their pitch in the Spring Budget and the next general election. There are better, more cost effective, ways to show the Government is aligned to the public’s priorities.