Schools and hospitals will be starved of the cash they need if Jeremy Hunt cuts taxes for the country’s richest, unions and tax campaigners have warned.
The TUC and Tax Justice UK have issued a last minute plea urging the Chancellor not to slash inheritance tax in the Autumn Statement next week. The levy is only paid by the richest 4% with couples able to hand up to £1million to their children without paying the duty.
Mr Hunt is considering paying for the giveaway by cutting Universal Credit, which could leave families hundreds of pounds worse off. In a joint letter to the Chancellor, TUC General Secretary Paul Nowak and Tax Justice UK Executive Director Robert Palmer warned that people are “living through the worst cost of living crisis in generations”.
They demanded Mr Hunt use the tax and spending update on Wednesday to prioritise “those in Britain who need support most - not those who need it least”. “At a time when many households are struggling to cover even the basics there’s simply no justification for cutting inheritance tax – especially if it is paid for by holding benefits down,” the pair wrote.
“This would just push more people into hardship. And it would further starve our public services of much-needed cash – meaning fewer teachers in our schools and fewer nurses on our wards.”
They added: “Cutting inheritance would only benefit the very wealthiest people in Britain. By contrast, millions of people across the country will be affected by how much social security is increased at the Autumn Statement – including many families in low and middle-income jobs. And all of us are impacted by deteriorating public services. The UK is the fifth richest economy in the world. No-one should be living in poverty or waiting for vital treatment. We appeal to you to make the right choices... The life chances of millions depend upon them.”
Parents are each able to pass £500,000 to their children and grandchildren without paying inheritance tax. The levy is currently charged at 40% above this threshold. The Treasury is looking at options including halving this rate to 20% or making the allowances even more generous. It is thought this could be the first step towards promising to scrap the tax completely at the next election. The current cost of abolishing inheritance tax would be £7billion.
According to the Institute for Fiscal Studies, around half (47%) of the benefit would go to the wealthiest 1% who have estates worth £2.1million or more at death. They would benefit from an average tax cut of around £1.1million. If inheritance tax is scrapped it will leave a whopping £15billion hole in the country’s finances in a decade’s time.
One of the ideas being looked at by Mr Hunt includes failing to increase benefits including Universal Credit as planned. The payments usually go up each April by the same amount as the inflation figure from the previous September. This would mean a 6.7% rise next year. Instead, the Chancellor is thinking about using the lower inflation figure from October, which is 4.6%.
Rishi Sunak today declined to comment on possible tax cuts as he visited a school in Chesterfield, Derbyshire. The PM said: “This Conservative Government has delivered, we are starting to ease the burden on the cost of living. There's work to do and you'll hear more about that next week in the autumn statement."