Byers faces Labour backlash over his call to abolish inheritance tax

Stephen Byers, the former cabinet minister, faced a backlash from Labour MPs after he called on Gordon Brown, the Chancellor, to abolish inheritance tax.

Mr Byers, an ally of Tony Blair, denounced the tax yesterday as a "penalty on hard work, thrift and enterprise", and said scrapping it would be a vote-winner for Labour.

Mr Byers is seen as an "outrider" for Tony Blair, putting forward ideas in which the Prime Minister is interested, to test the reaction. The proposal, that would allow upper-middle-class families to pass their wealth to their children untaxed, produced angry ripostes from the Brown camp and from a prominent Blairite MP.

Mr Byers said scrapping the tax would show that Mr Brown would keep up the Blair strategy of appealing to the middle class. Writing in The Sunday Telegraph, Mr Byers said: "We know that Tony Blair will stand down at some stage before the next election. The danger for Labour in electoral terms has always been that when he departs from Downing Street, voters will feel that the pragmatic and modernising approach of New Labour has gone with him. The challenge for his successor is to demonstrate that this is not the case."

Mr Byers released figures that showed the average house cost £400,000 in several London boroughs and in some towns in southern England. Inheritance tax is charged at 40 per cent on any estate above £285,000.

"Soaring house prices have led to over one and a half million homes now being valued in excess of the threshold for inheritance tax," he said.

But Chris Bryant, a fellow Blairite MP, said that almost no one in his Rhondda Valley constituency, in Wales, was affected by the tax.

"What Stephen Byers is proposing is at the maverick end of the political discussion taking place inside the Labour Party," he said. "This idea was around in Margaret Thatcher's time and she dropped it as too extreme. Stephen now seems to be doing the Tories' work for them.

"If he is trying to say that the next leader of the Labour Party has to nail his colours to the Blairite mast, that seems a slightly odd demand to make of Gordon Brown, who steadfastly helped to create New Labour and maintain its appeal."

And a source close to Mr Brown said: "I don't think Stephen Byers actually believes a word of this nonsense. He certainly never said anything of the sort when he was in government. He's probably just trying to get a bit of attention or stir up some division in the party, but even the most hardcore Blairite MPs think he's lost the plot this time. Frankly, nobody knows why he's saying this stuff, nobody agrees with him and ultimately nobody really cares."

Mr Byers pointed out that a three-bedroom house in Swindon, another marginal Labour seat, could fetch more than £300,000. But Swindon North's MP, Michael Wills, retorted: "It's a pity that Stephen Byers didn't think to consult me before issuing statements about my constituency.

"People in Swindon remember all too well the misery of economic instability, repossession and negative equity under the Tories, and what matters to them most is the stability, low interest rates and rising wealth which Labour has delivered." The Trade and Industry Secretary Alistair Darling, an ally of Mr Brown, said that only 6 per cent of estates were big enough to be affected by the tax.