Tories may delay plan to reduce inheritance tax

Flagship Tory plans to lift millions of families out of inheritance tax could be delayed until five years after a Conservative election victory because of the economic crisis, David Cameron has warned.

The Tory leader also signalled that tax credit payments to middle-class households could be scrapped, in a drive to reduce government spending.

He said the grim economic inheritance of an incoming government would require a situation where "everyone is putting their shoulder to the wheel, and sharing the difficult decisions".

Raising the inheritance tax threshold – funded by a levy on wealthy foreign "non-domiciles" living in Britain – has become a flagship policy for Mr Cameron. Its announcement nearly two years ago was credited with reviving Tory fortunes after Gordon Brown became Prime Minister, and was expected to be an early priority for an incoming Conservative government.

But Mr Cameron yesterday would only commit himself to reforming inheritance tax within the five-year life of a parliament. He told BBC1's Andrew Marr Show: "It's a promise, something we want to do, obviously in a parliament."

The Tory leader, who this week begins a holiday in France and Greece, also said tax credit payments to some better-off households may be scrapped.

He said: "Tax credits we support. We think they are a good idea to get payments to working families on low incomes.

"But they do go to families who earn over £50,000, so we have to look at that."

He claimed he was the first opposition leader to have "looked the British public in the eye and say: 'You know, we are going to cut public spending'."