Tories set to delay flagship tax cut

Party at odds over its policy on inheritance tax and top income-tax rate
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The Conservatives have admitted that they may have to delay their flagship plans for cutting inheritance tax, after shadow business secretary Ken Clarke declared it was not the "highest priority".

Mr Clarke yesterday said that dropping the tax was merely an "aspiration" – prompting the party to scrabble to insist that the pledge would indeed be a manifesto commitment at the next general election.

But the Conservatives admitted that they may have to wait until the end of the next parliament to implement the policy, which was central to the party's fightback against Labour when it was dramatically unveiled by shadow Chancellor George Osborne during the 2007 Conservative party conference.

The policy, which was greeted with delight by the Tory faithful, is seen as a key factor in the Tory rejuvenation which forced Gordon Brown to abandon plans for a snap autumn election.

Yesterday Conservative high command was accused of being in disarray as they were forced to deny suggestions that the policy had been ditched, following Mr Clarke's claim that the tax cut would only be implemented "sooner or later." Mr Clarke said: "That's an aspiration we have retained because inheritance tax hasn't moved in line with inflation. But I don't think we are going round any longer saying that this is something we are going to do the moment that we take power.

"We are going to have to consider, when we get in, when we can afford to do that, is my opinion. And I don't think anybody is saying anything different from that. We think there is a case to be made, which we made very effectively, for making sure inheritance tax doesn't catch people who have been caught by house price increases.

"Sooner or later, I would hope we would do that. But I really don't think we are any longer saying that the Labour Party is going to leave us in a position to make that the highest priority when we get in," Mr Clarke continued. "The highest priority is tackling the debt, doing our best to avoid any more tax increases."

The row came as David Cameron faced a backlash from some in his party, after senior figures made it clear the party would not drop Labour plans for a new 45 per cent top rate of tax on incomes over £150,000 after the next election. Boris Johnson, the Mayor of London, said the tax rise would act as a "deterrent to enterprise", while Lord Tebbit asked: "Who is going to be enthused to vote for them by promises of higher taxation?"

Yesterday Labour and the Liberal Democrats seized on Mr Clarke's comments.

Vince Cable, the Liberal Democrat Treasury spokesman, said the episode was "further evidence of the disarray and confusion which has characterised the Conservatives' tax policy and their response to the economic crisis".

He said: "It is very striking that this statement is by Ken Clarke rather than George Osborne, since it was Osborne who milked a great deal of support at the time he announced this promise.

"It is still not clear if Clarke is speaking for Osborne or for himself. But this is a reminder of where the Tories' priorities really lie. By contrast, the Liberal Democrats are emphasising the need for cuts – if they can be afforded – to be concentrated on the less well-off and low paid."

Angela Eagle MP, the Treasury Minister, added: "We've been calling on the Tories for months to scrap this unfair give-away to the wealthiest few thousand estates. It's good that Ken Clarke is starting to listen, but what about David Cameron and George Osborne? What is clear is that the more Conservative economic policies come under scrutiny, the more they fall apart."

But a spokesman for Mr Osborne said: "People should be clear that the promise we made on inheritance tax is a promise and we will keep it.

"It will be in the manifesto, but for years George Osborne has said he will not write future budgets, including the 2010 one, in advance."