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.
Ryanair has reported another year of record profits and passenger numbers.
The average fare at the airline, which is Europe’s largest by passenger numbers, was 21% more expensive than 12 months earlier, its annual results showed.
But the company suggested a cut in ticket prices could be on the way after this summer when prices will either be the same or more expensive than last year.
Annual profits reached €1.92bn (£1.64bn), surpassing the previous record of €1.45bn (£1.26bn) made in the year ending March 2018.
Passenger numbers also outpaced previous all-time highs and are now well above pre-pandemic numbers at 184 million – a rise of 23% on the pre-COVID year of 2019.
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Ticket prices
Those passengers paid fares costing an average of 21% more than the year up to March 2023 but Ryanair’s chief executive Michael O’Leary said if the company has to cut fares to have planes 94% full next April, May and June “then so be it”.
While demand is “strong” for summer flights and its summer schedule will operate over 200 new routes, the low-cost carrier said it remained “cautiously optimistic that peak summer 2024 fares will be flat to modestly ahead of last summer”.
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Boeing headwinds
The passenger increase has come despite Boeing‘s delays in delivering new planes to the airline.
Ryanair had staked a large part of its financial success on expansion through 300 new 737 MAX 10 aircraft.
But the plane manufacturer has been beset by delays amid regulatory and media scrutiny of safety at its manufacturing sites after a door blew off an Alaska Airlines Boeing 737 MAX 9 jet.
There’s a risk those delays “could slip further”, Mr O’Leary said.
But Ryanair said it would receive “modest compensation” from Boeing for the delays.
The no-frills carrier also said its fuel bill rose 32% to €5.14bn (£4.4bn).
Billionaire Sir Jim Ratcliffe has told Sky News that Britain is ready for a change of government after scolding the Conservatives over their handling of the economy and immigration after Brexit.
While insisting his petrochemicals conglomerate INEOS is apolitical, Sir Jim backed Brexit and spent last weekend with Labour leader Sir Keir Starmer at Manchester United – the football club he now runs as minority owner.
“I’m sure Keir will do a very good job at running the country – I have no questions about that,” Sir Jim said in an exclusive interview.
“There’s no question that the Conservatives have had a good run,” he added. “I think most of the country probably feels it’s time for a change. And I sort of get that, really.”
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Sir Jim was a prominent backer of leaving the European Union in the 2016 referendum but now has issues with how Brexit was delivered by Tory prime ministers.
“Brexit sort of unfortunately didn’t turn out as people anticipated because… Brexit was largely about immigration,” Sir Jim said.
“That was the biggest component of that vote. People were getting fed up with the influx of the city of Southampton coming in every year. I think last year it was two times Southampton.
“I mean, no small island like the UK could cope with vast numbers of people coming into the UK.
“I mean, it just overburdens the National Health Service, the traffic service, the police, everybody.
“The country was designed for 55 or 60 million people and we’ve got 70 million people and all the services break down as a consequence.
“That’s what Brexit was all about and nobody’s implemented that. They just keep talking about it. But nothing’s been done, which is why I think we’ll finish up with the change of government.”
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UK needs to get ‘sharper on the business front’
Prime Minister Rishi Sunak has indicated an election is due this year but Monaco-based Sir Jim is unimpressed by the Conservatives’ handling of the economy.
“The UK does need to get a bit sharper on the business front,” he said. “I think the biggest objective for the government is to create growth in the economy.
“There’s two parts of the economy, there’s the services side of the economy and there’s the manufacturing side. And the manufacturing, unfortunately, has been sliding away now for the last 25 years.
“We were very similar in scale to Germany probably 25 years ago.
“But today we’re just a fraction of where Germany is and I think that isn’t healthy for the British economy… particularly when you think the north of England is very manufacturing based, and that talks to things like energy competitiveness, it talks to things like, why do you put an immensely high tax on the North Sea?
“That just disincentivises people from finding hydrocarbons in the North Sea, in energy.
“And what we need is competitive energy. So I mean, in America, in the energy world, in the oil and gas world, they just apply a corporation tax to the oil and gas companies, which is about 30%. And in the UK we’ve got this tax of 75% because we want to kill off the oil and gas companies.
“But if we don’t have competitive energy, we’re not going to have a healthy manufacturing industry. And that just makes no sense to me at all. No.”
‘We’re apolitical’
Asked about INEOS donating to Labour, Sir Jim replied: “We’re apolitical, INEOS.
“We just want a successful manufacturing sector in the UK and we’ve talked to the government about that. It’s pretty clear about our views.”
Sir Jim was keener to talk about the economy and politics than his role at struggling Manchester United, which he bought a 27.7% stake in from the American Glazer family in February – giving him an even higher business profile.
Old Trafford stadium in Manchester. Pic: AP
Push for stadium of the North
He is continuing to push for public funds to regenerate Old Trafford and the surrounding areas despite no apparent political support being forthcoming. Sir Keir was hosted at the stadium for a Premier League match last weekend just as heavy rain exposed the fragility of the ageing venue.
“There’s a very good case, in my view, for having a stadium of the North, which would serve the northern part of the country in that arena of football,” Sir Jim said. “If you look at the number of Champions League the North West has won, it’s 10. London has won two.
“And yet everybody from the North has to get down to London to watch a big football match. And there should be one [a large stadium] in the North, in my view.
“But it’s also important for the southern side of Manchester, you know, to regenerate.
“It’s the sort of second capital of the country where the Industrial Revolution began.
“But if you have a regeneration project, you need a nucleus or a regeneration project and having that world-class stadium there, I think would provide the impetus to regenerate that region.”
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