Sunak accused of ‘desperate’ inheritance tax briefing as date of spring budget confirmed
Rishi Sunak has been accused of a “desperate” briefing on inheritance tax (IHT) after reports suggested it would be slashed ahead of the next election.
It comes as the government confirmed the date of the next spring budget, which will be delivered on 6 March.
With a general election looming next year, Mr Sunak will be under pressure from Tory MPs to announce tax cuts to boost their chances of victory.
On Wednesday, The Daily Telegraph reported that Downing Street is considering axing IHT as part of a “gear change” on tax, having made halving inflation rather than reducing the tax burden a priority of his premiership.
However, Labour rubbished the story as a “desperate briefing from a desperate prime minister who is spending his Christmas break trying to keep Tory MPs on side”.
James Murray, Labour’s shadow financial secretary to the Treasury, said: “There have been 25 Tory tax rises since the last election.
“Now at a time when families across Britain are struggling with the cost of living and our NHS is on its knees, Rishi Sunak is trying to buy off his backbenchers with an unfunded tax cut for millionaires.”
Inheritance tax is hated by many Conservative MPs and there has long been briefings it could be scrapped.
The prospect is often raised when the party is facing political difficulty, with similar reports emerging back in July ahead of three by-elections the Tories were predicted to lose. (In the end, they lost two out of three).
The Telegraph, which is campaigning to abolish IHT, said scrapping it is one of a handful of major tax cuts that have been discussed by senior figures in Number 10.
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PM refuses to comment on inheritance tax ‘speculation’ back in August
Downing Street called the report “speculation” and refused to comment further.
However, the prime minister’s official spokeswoman said “the vast majority of estates don’t pay inheritance tax” and it is forecast to contribute “almost £10bn a year” by 2028-9 to fund public services.
Around 4% of people pay inheritance tax. At present it is charged at 40% and applies to estates worth more than £325,000, but there are allowances that can mean it’s only paid on more valuable estates.
Those in favour of the tax say it is important for social mobility and abolishing it would be a giveaway for the wealthiest minority.
However Conservative MPs who want to see it scrapped call it a “death tax” because it applies to earnings that have already been taxed.
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Others have called for it to be reformed rather than scrapped, with experts pointing out exemption thresholds allow many couples to pass on up to £1m tax-free.
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Cutting inheritance tax would likely create a dividing line with Labour, which is unlikely to support such a measure.
The party is enjoying a healthy 20-point lead in the polls, and with an election expected by January 2025 at the latest, the spring budget will be one of Mr Hunt’s last chances to announce giveaways that could woo voters.
Today it was also reported that the government could announce support for first-time buyers before polling day, which may include reducing the upfront cost of a home with a scheme for longer, fixed-rate mortgages.
Budget ‘last throw of the dice’
However, Mr Murray said no matter what is announced “the next budget will come after fourteen years of economic failure under the Conservatives that have left working people worse off”.
The Lib Dems also said it was “too late to turn the tide” and called it a “last throw of the dice by a flailing Conservative government”.
Mr Hunt began to ease the historically high tax burden in his autumn statement, including by cutting national insurance.
But millions of workers will still face a squeeze on their finances as the tax burden remains at record high, with a freeze on thresholds still in place.
Ahead of the budget, the chancellor has commissioned the Office for Budget Responsibility (OBR) to prepare an economic and fiscal forecast to be presented to parliament alongside the statement.
This is standard practice before major fiscal events.
The lack of an OBR forecast at his predecessor Kwasi Kwarteng’s mini-budget in September 2022 spooked the markets and sparked a huge economic fallout, pushing up government borrowing costs and putting certain pension funds on the brink of collapse.
Business
Vivergo: How US-UK trade deal could bring about collapse of huge renewable energy plant in Hull
The smell of yeast still hangs in the air at the Vivergo plant in Hull but the machines have fallen quiet.
More than 100 lorries usually pass through here each day, carrying 3,000 tonnes of wheat. It is milled, fermented and distilled. The final product is bioethanol, a renewable fuel that is then blended into E10 petrol.
This is a vast operation. It took several years to build, with considerable investment, but it is on the verge of closing down. Management and staff are holding out for a last-minute reprieve from the government but time is running out.
It’s been a turbulent journey. The plant was already being annihilated by US rivals, losing about £3m a month. Vivergo and Ensus, based in Teesside, blamed regulations that enable US companies to earn double subsidies.
They were pushing for regulatory change but then a killer blow: The US-UK trade deal, which allows 1.4 billion litres of American ethanol into the UK tariff-free (down from 19%).
“We’ve effectively given the whole of the UK market to the US producers,” said Ben Hackett, managing director at Vivergo.
“If we were to have the same support that the US industry has, if we could use genetically modified crops, we wouldn’t need that tariff. We would be able to compete. If we had the same energy costs. We wouldn’t need those tariffs.”
The government has the weekend to come up with a plan that could keep the business running. If it fails, Vivergo will begin issuing redundancy notices to its 160 staff.
Ben Hackett
It’s a devastating prospect for workers, many of them live in Hull and are nervous about alternative opportunities in the area.
Mike Walsh, a logistics manager who has been working at the plant for 14 years, said: “It’s not a great place to be at the moment. It’s a very well paid, very high-skilled role and they’ve (Vivergo) given everybody an opportunity in an area that doesn’t pay that well…. The jobs market isn’t as good as what people would like. So it does impact the local economy.”
He called on the government to “help us, save us, give this industry a future”.
His colleague Claire Wood, lead productions engineer, said: “I moved here after a career in oil and gas for 10 years, partly because I want to be part of the transition to renewable fuels. I can see so much potential here and it’s absolutely devastating to know that this place might be closed very, very shortly and that all that potential just goes away.”
Thousands more could be affected. Haulage companies may have to lay off truck drivers and farmers could also suffer a blow.
Vivergo makes bioethanol using wheat. That wheat is bought from farms from Yorkshire and Lincolnshire.
Claire Wood
The National Farmers Union has sounded the alarm, saying: “Biofuels are extremely important for the crops sector, and their domestic demand of up to two million tonnes can be very important to balance supply and demand and to produce up to one million tonnes of animal feed as a by-product.”
Another bioproduct is carbon dioxide. The gas can be captured and used to put the fizz in drinks or injected into packaging to preserve food.
If Vivergo and Ensus were to go, Britain would lose as much as 80% of its output of carbon dioxide. Supplies are already tight across Europe, meaning this decision could compound shortages across a range of sectors, from meat-packing to healthcare.
The industry is calling on the government to help. Vivergo says it needs temporary financial support but that the government must create a regulatory and commercial environment in which it can thrive.
It says rules that award double subsidies to companies that use waste product in their bioethanol must be changed. At present, these rules are being used by US companies that make ethanol from Uldr – a by-product of processing corn. They argue this is not a genuine waste product.
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Another option is to grow the market. Industry leaders are calling on ministers to increase the mandated renewable fuel content in petrol from 10% to 15% and for an expansion into aviation fuels. That would allow British companies to carve out a space.
The government has been locked in talks with the company since June.
It said: “We will continue to take proactive steps to address the long-standing challenges it faces and remain committed to a way forward that protects supply chains, jobs and livelihoods.”
However, the time for talking is almost over.
Mr Hackett said he had no idea how the government would respond but he was firm with his stance, saying: “In times of global uncertainty, losing that energy certainty and supply from the UK is a problem.
“I think what they’re missing out on is the future growth agenda. We’re the foundation on which the green industrial strategy can be built. We make bioethanol that today decarbonises transport. Tomorrow it will decarbonise marine. It will decarbonise aviation.”
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