IT WAS the autumn of 2007 when George Osborne’s reputation as a stellar tactician was sealed. Wind back then – it is hard to recall – and David Cameron was facing the abyss, writes Eddie Barnes
The new prime minister, Gordon Brown, was riding on a wave of post-Blair acclaim (as I said, hard to recall) and preparing to back a snap election, which would probably have consigned the Conservatives to defeat.
That Mr Brown didn’t is attributed in large part to Mr Osborne. Addressing the Conservative Conference, the shadow chancellor announced that the threshold for inheritance tax would rise from £300,000 to £1 million.
Together, with a bravura without-notes speech by Mr Cameron the following day, it spooked Mr Brown, who promptly called off any notion of going to the country. His reputation never recovered.
How times have changed. The 2007 conference season was the last before the Big Crash, and the last time that Mr Cameron and Mr Osborne talked of “sharing the proceeds of growth”.
Instead, over the coming years, as they headed into government, they were forced to share the proceeds of pain.
Consequently, the politics of 2012, so changed to 2007, demand that when Mr Osborne gives his Budget today, he makes it clear that those with the broadest shoulders are bearing the greatest burden.
His plan to axe the 50p top rate of tax, while arguably good economics, runs a coach and horses through that. So the Chancellor is in desperate need of cover. In what would be a neat reminder of his 2007 political trick and, therefore, must hold huge appeal to him, might he turn back to inheritance tax to do it ?
Paul Johnson, director of the Institute of Fiscal Studies (IFS) thinks that he should. Mr Johnson notes that inheritance tax is another levy which is routinely exploited for avoidance by the wealthy, either with the help of trust funds, or simply by buying up farms or unquoted businesses.
It all ensures that family money gets passed on without the Taxman getting his share. The IFS says it would be easy to close the loophole – instead of taxing the deceased estate, the tax hit should fall on the person receiving the benefits of the will.
Mr Osborne has already taken Mr Johnson’s advice on other ways to boost his coffers, such as the crackdown on stamp duty avoidance, also to be announced today. An attack on inheritance tax dodgers might be on the cards as well.
Death taxes are, of course, unpopular among the better off and middle classes. But, given the politics facing the coalition government, that arguably only increases their appeal.
In 2007, Mr Osborne used inheritance tax to shore up Mr Cameron’s position and show the Tory heart was beating. Today, a return to the same tax would show the depth of the coalition’s attack on tax avoidance. Politically, it could help the pair out once again.