Osborne promises £1m inheritance threshold

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Shadow chancellor George Osborne today promised a Tory government would take family homes out of inheritance tax - raising its threshold to £1 million.

Mr Osborne said Conservatives wanted to help "people whose only crime in the eyes of the taxman is that instead of spending their savings on themselves they want to pass something on to their families".

He told his party's conference in Blackpool: "The next Conservative government will raise the inheritance tax threshold to £1 million. That means we will take the family home out of inheritance tax."

And he confirmed plans to abolish stamp duty for anybody buying their first home for under £250,000, saying that would take 200,000 people a year out of the transaction tax.

The inheritance tax threshold is currently £300,000.

Mr Osborne said the two measures would be paid for by a flat-rate annual charge of £25,000 on those who register in the UK for non-domicile status to protect their earnings from income tax.

He said: "It is easy to administer, difficult to avoid and strikes the right balance between a fair tax system and a competitive economy."

Mr Osborne repeatedly referred to his ambition to cut taxes, seeking to buoy activists ahead of a possible snap election, saying: "For this party low taxes aren't just for Christmas, they are for life."

He promised: "I will not promise un-funded, undeliverable tax give-aways to dress up a press conference in an autumn election campaign."

And he lambasted Prime Minister Gordon Brown, mocking him as the nation's bank manager, saying: "Let's start queuing round the corner to close our account."

Earlier, the Tory conference also heard plans to end the "compensation culture" said to be threatening school trips for youngsters as the party pressed ahead with its determination to present a raft of policies to counter charges it would be caught on the hop if Mr Brown goes to the country.

Shadow schools secretary Michael Gove said that because children were denied excitement on school outings some were turning to the "dangerous environment of gang culture".

He also pledged to give schools greater power to exclude thugs and promised to grant anonymity to teachers who are victims of false allegations of abuse as part of a discipline drive.

And he told the conference: "In the classroom, we will shift the balance of power, so it is the troublemaker who has something to fear not the teacher."

Mr Gove also pledged to remove the "bureaucratic barriers" and "administrative obstacles" that prevent charities and churches from opening new schools.

Andrew Tailby-Faulkes, tax partner at Ernst & Young, warned the Conservatives that imposing a £25,000 levy on non-domiciles could have an adverse effect on the UK economy.

He said: "Any changes to the non-domiciled tax regime should be carefully thought through before imposing a flat penalty on individuals. These changes could hit the City hard and have an adverse economic impact on the UK.

"Britain benefits significantly from the businesses, jobs and wealth that these people generate.

"Their willingness to work and invest here helps boost London's competitive edge against other global financial centres. That could easily be jeopardised."

Carl Emmerson, deputy director of the financial thinktank the Institute for Fiscal Studies, said there were risks in the Conservative plans to pay for cuts in inheritance tax and stamp duty with a flat-rate levy on non-domiciled residents.

Mr Emmerson said that the Tory costing of £3.5 billion for the proposed cuts looked reliable.

But he told BBC Radio 4's World at One: "The concern is that the £3.5 billion they need to pay is coming from a charge on people who take non-domiciled status in the UK and we don't know exactly how many there are in that position, let alone how many will choose to pay the £25,000 a year that Mr Osborne wants to charge them."

Some of the "non-doms" may choose to move abroad to avoid the charge, may opt not locate themselves in the UK as a result or may decide not to take up non-dom status, he suggested.

"There is much more risk over the money they are planning to bring in than the money they are planning to give out," said Mr Emmerson.

Meanwhile, the author of a Government-commissioned report on welfare reform raised questions over another plan floated by the Tories to give working couples additional tax credits worth £2,000 a year, paid for by reductions in the welfare bill produced by allowing private and voluntary organisations to help jobseekers into work.

David Freud suggested it could be seven years before enough savings were made to pay for the extra credits proposed by the Tories.

Mr Freud told World at One: "When the system gets going, you should be able to get £3 billion - £4 billion savings per year and that starts to accumulate.

"If you did it at the private and voluntary sectors' risk, you would be able to start pulling in that kind of money after five, six or seven years. If you did it in another way - so the state took more risk - you may be able to start doing it earlier."

Conservative policy review chairman Oliver Letwin, who will be responsible for writing the Tories' manifesto, acknowledged that the tax credit changes could not be introduced immediately.

He said: "The savings that are going to accumulate from doing the right thing in welfare reform will happen progressively. Whether it takes three years or five years, the point is they will accumulate over time.

"As they accumulate, the Exchequer has more money. It spends that money on removing the couple penalty in the tax credit system."

Mr Letwin said that the Tories were offering a balanced tax package designed to promote their policy priorities.

"We are in favour of opportunity and aspiration, we are also in favour of a stronger society and we do want a safer and greener Britain," he said.

And he added: "There are no net tax cuts in our overall proposals. Our overall proposals end up adding exactly as much to taxes on pollution and taxes on non-domiciled residents as they take off other kinds of taxes for people in families."

Later, Mr Osborne denied his plans for the £25,000 levy would cause high-earners to quit Britain.

He told a fringe meeting organisd by The Independent and The Independent on Sunday newspapers: "I think that is not going to happen. For them, what they want is certainty."

And of the prospects for an election, he said: "We are either in the position where we have more advance notice than any opposition party has ever had or the Prime Minister is going to bottle it.

"That's not a bad position for an opposition party to be in."

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