Apocalypse's Fifth Horseman rides in on tax

MR SORRY comes too late. That was the clear view of recipients of that rarest of gestures - an apology from the Great Charlatan - in the wake of the tax credits fiasco last week. That was churlish: not only were they given a degree of consideration denied to the family of Dr David Kelly, but the Prime Minister, in his new role as deputy to Gordon, was taking the fall for the Chancellor - a kind of rich man's Dawn Primarolo.

The notion of the Inland Revenue as the Cheeryble brothers of our day, dispensing 1.9bn of excess benefits to the undeserving, will boggle most people's minds. It illustrates to the point of caricature the incongruity of Labour's policy of conflating tax and benefits. That, of course, is part of Brown's strategy of socialism by stealth. It is looking less stealthy by the hour. This means of enforcing the ideology that dares not speak its name was gleefully celebrated by Polly Toynbee, who represents the Mallory Towers tendency within The Party We Love, in a piece written two years ago in a Labour journal.

Giggling triumphantly behind the bicycle shed, La Toynbee opined: "The second success has been tax credits, a brilliant device. Its main intent is a noble redistribution of income, while its devious political effect has been to bamboozle all opposition... In a remarkable conjuring trick, New Labour has disappeared social security from the face of the political landscape. It is a non-subject, a non-concept, a non-department. The new credits are so fiendishly complex that the public does not really understand them or know what they are, but they sound OK. That leaves the Tories bleating on the sidelines about a policy the public knows little of."

Tee-hee - what a jape! Petty Polly, besides giving a classic insight into Whiggish progressives' ineradicable distrust of the public, revealed the philosophy behind Brown's policy of making the Inland Revenue the dispenser, as well as the confiscator, of the nation's wealth. The moment when the last figleaf of credibility fell from the New Labour 'project' can be dated from the day when Tony Blair turned his back on Frank Field as welfare reformer and gave Gordon a free rein to ride Redistribution - the Fifth Horseman of the Apocalypse.

Pity poor voters in France and the Netherlands who imagine Britain is a rip-roaring free-market economy: next year Brown is predicted to spend 45p of every pound made by wealth-creators, compared with 40p when he came into office. Tax is about to roar out of control, as is evidenced by recent, sinister developments relating to inheritance tax - the Death Tax - which is the most immoral of all statist imposts.

Under new rules, executors of all estates in probate must furnish the Inland Revenue with an inventory, even if it falls below the Death Tax level. This will affect around 250,000 estates a year and will place a further burden on the bereaved. Exemption covers inheritances up to 275,000 which, in the context of the housing market today, means that more and more people will be caught in this net. A family home which, through no fault of its occupants, has risen in value may have to be sold off to meet the demands of the Death Tax. In this way, a notional benefit becomes a real liability.

Labour gurus Patrick Diamond and Lord Giddens have just written a book advocating that the government should tax even gifts made by parents in their lifetimes to their children. This whole obscenity must stop. In the United States the Death Tax is on Death Row: a campaign has secured its phased repeal and it will be extinct by 2010. However, since the Democrats managed to insert a 'sunset clause' into the legislation, it will revive in 2011 unless Congress drives a stake through its heart.

The notion that people who have paid income tax, Vat, council tax and every other government impost all their lives should then be robbed of 40% of their assets on their deaths is a moral outrage. At the heart of this debate is the core issue of who owns the country's wealth - citizens or government? While the spectacle of Blair and Brown - the Burke and Hare de nos jours - chasing hearses is morally rebarbative, the supreme irony is that the Death Tax is also counter-productive. It reduces economic growth (and so employment); it increases the cost of capital, which impedes research and development; it causes tax avoidance and evasion; and it only raises a puny amount of revenue.

In Britain, IHT, as it is officially known, raises only 2.5bn, or 0.5% of UK tax revenues. When the costs of collecting and administering it are factored in, as well as the economic damage already noted, its effect is actually negative. The leading commentator on this subject, Dr Barry Bracewell-Milnes, has calculated that death taxes have probably had a negative return throughout their 100-year history. The motor of such fiscal policy is the socialist ambition to make the "rich" (a category now including anyone with assets over 275,000) poorer, rather than the poor richer.

The Tories ought not only to be crusading for abolition of the Death Tax, but carrying on a conversation with the electorate about the whole fiscal structure of Britain. They should start now, instead of startling the public with novel ideas on the eve of the next general election. An obvious candidate for debate is the project of a Flat Tax: harmonising all tax at a uniform (low) rate, with a higher level of personal allowance.

Already about a dozen countries have adopted a flat tax, notably in the former Soviet states. Hong Kong, the most liberal economy on earth, adopted it in 1948. Estonia's is the purest form: an unqualified 24% tax on all forms of income. The US has just introduced it, at a 15% rate, into Iraq. Germany, with its intractable economic problems, is seriously considering it. Most opposed is France, with its statist heritage from 1789.

The Adam Smith Institute recommends a 22% flat tax for Britain. It might not be suited to our economy: many eastern European countries have adopted it primarily to reduce tax evasion. Yet, with Gordon's gimcrack Heath-Robinson fiscal system about to crash and burn, a new tax model is urgently needed. It should be market-friendly and innovative and the debate should start now. Let's hear it from the Tories.