CHANCELLOR Alistair Darling outrageously stole a batch of Tory polices – including a big cut in inheritance tax – to launch a Labour fightback after the fiasco of the aborted election.
Delivering an electrifying mini-Budget, Mr Darling surprised MPs by announcing the inheritance tax threshold for married couples would be immediately doubled to £600,000.
The move – which will benefit 3m widows and widowers by being applied retrospectively – was a blatant pitch to trump a popular Conservative pledge to hike the threshold to £1m.
That policy triggered the Tory surge in the polls that preceded Gordon Brown’s weekend decision to abandon the election pencilled in for November 1.
But the Tories condemned it as “another tax con” – insisting 500,000 couples had already legally set up trusts to make tax-free £600,000 transfers, perhaps by dividing an inheritance between children and spouse.
Mr Darling went further, by targeting wealthy “non-domiciles” registered as living abroad for tax purposes and by pledging to switch “greener” air taxes from passengers to flights.
Again, similar policies were unveiled at last week’s Conservative conference, which transformed the party’s fortunes after months in the doldrums.
In the Commons, shadow Chancellor George Osborne was quick to taunt Mr Darling, telling him: “He should have called that election and let us give the budget.
“Instead, we have a pre-election budget without the election. We all know this report was brought forward so it could be the starting point for the campaign – before you took the pistol and fired it into your foot.”
Mr Darling sweetened the pill for Labour backbenchers by pledging an extra £2bn for health and for education, taking the annual NHS budget to £110bn by the end of the decade.
Every area would have a new primary school by 2010 and there would be 20 new hospitals, 150 new walk-in centres, 100 new GP practices and a regular NHS check-up for every adult.
But the Labour benches were subdued, while the Conservative ranks were ecstatic at clear evidence they, at last, were setting the political agenda.
The populist package also masked a worrying picture of lower spending, higher borrow-ing, a slightly higher tax burden and lower economic growth.
Under the inheritance tax pro-posals, the £300,000 threshold for paying 40% tax would be transfer-red to a married partner upon death, creating a £600,000 exemp-tion when the second partner dies.
Mr Darling said that combined threshold would be further hiked to £700,000 by 2010 and, in future, house prices would be taken into account when setting thresholds.
The Chancellor contrasted his plan, costing £1.2bn by 2010, with the Conservative pledge to spend a further £2bn on hiking the threshold to £1m. That would hand £1bn to the wealthiest 1% of people, who boasted estates worth more than £950,000, he said.
Mr Darling said: “Not unafford-able tax cuts which deprive public services of the money they need, but an affordable tax cut, improved investment in health and education, founded on economic stability.”
On so-called “non-domiciled” taxpayers, the Chancellor proposed a flat-rate £30,000 charge after a person has been resident for seven years and a higher charge after 10.
Again, that bears a remarkable similarity to the Conservative proposal for a £25,000 levy on all those non-domiciled. The government had been “reviewing” the issue for five years.
Mr Darling also moved to calm anger over the lucrative tax breaks enjoyed by private equity bosses, by hiking their capital gains tax from 10% to 18%.
However, critics will point out that a tax rate of 18% will still mean they are paying less tax than their cleaners, the biggest complaint.
FOR a full assessment of Merseyside business reaction to the tax changes, see today’s Business Week.
OPINION: PAGE 10;
BILL GLEESON – BUSINESSWEEK: PAGE 8
