Johann Hari: Why is Labour selling its soul to right-wing myths?

Share

A right-wing campaign to strangle one of the most progressive forms of taxation has just hopped, skipped and jumped to the victory post – in a Labour Comprehensive Spending Review.

Inheritance tax was introduced in Britain in the 1910s by David Lloyd George, the great radical chancellor. His goal was to erode the British class system, by chipping away at the ability of the rich simply to hand their wealth to their children, who would in turn hand it to their children, and so on and on, down the ages. He saw that having a sub-class at the top of society who live lavishly just because they popped from the right womb was bad for the economy and bad for society, so he began to tax this "unearned wealth", using the proceeds to create pensions for the poor. "Death is the ideal time to tax rich people!" he told a rally.

It worked well until, in the 1990s, a campaign was launched by right-wing newspaper owners to demonise this tax. They imported the Reagan-Bush-Cheney claim that it was a "death tax". In the past fortnight, David Cameron's Conservative Party aggressively picked up the core myths of this campaign – and the Labour Government has failed to answer them. Instead of challenging these right-wing myths, it has capitulated to them. Alistair Darling announced a new tax structure where, by 2010, it will be possible for a British citizen to receive a £699,999 bonanza they have done nothing at all to earn, and pay not a penny of tax. At the core of the campaign that has bullied the government into submission are three myths:

* Myth One: Until these changes, "ordinary people" were forced to pay inheritance tax. In fact, only the richest 6 per cent of estates pay a penny in inheritance tax. The remaining 94 percent of the population pay nothing. No economist disputes this. It is true that some people look nervously at their current house price and think it is close to the line for payment. But they fail to realise that virtually everyone spends their cash gradually in their old age, whittling down their estate to far below the taxable level. Darling's proposals have now whittled the pool of people who will pay down even further, to the top 3 per cent – making it a de facto tax cut for some fantastically wealthy people.

nMyth Two: Inheritance tax is a tax on "hard work" and "aspiration". This argument is bizarre. By definition, you do no work for your inheritance. You could lie in bed all day, every day, doing nothing but eating lard and belching, and you would still get up to £699,999 tax-free.

Slashing inheritance tax does the opposite of rewarding hard work. It creates an class of inheritees who have no incentive to work, since they will be rich no matter what they do. Strangely, the right-wingers who complain that the benefits system creates a "moral hazard" by giving people "money for nothing" see no moral hazard in doing exactly the same thing with the rich, with far larger sums.

* Myth Three: It's a form of double taxation. I paid tax when I bought my house, why should I pay again when I die? This argument fails a logic test. You paid tax when you acquired your house; when another person (say, your child) acquires the house, they pay tax too, because they are – wait for it! – a different person.

Of course, it's not surprising that the very rich men who lead the Conservative Party today should trot out these arguments. The shadow Chancellor, George Osborne, for example, is likely to inherit tens of millions.

But it is depressing that the Labour Party has not argued back. Inequality is now a major political issue in Britain: 85 per cent in the latest YouGov poll think it is too high. The whispers from Darling that the Government will finally act on the non-domiciled super rich, who currently disgracefully pay no tax at all, is a partial response to this mood. But inheritance tax is one of the oldest ways to erode inequality, and the best. Instead of making this case, the Government has caved in.Lloyd George would weep.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

SEN Teaching Assistant Runcorn

£50 per day: Randstad Education Cheshire: SEN Teaching Assistant EBD , Septemb...

SEN Teaching Assistant

£50 per day: Randstad Education Cheshire: SEN Teaching Assistant We are curr...

HR Manager - Kent - £45,000

£40000 - £45000 per annum: Ashdown Group: HR Manager / Training Manager (L&D /...

Senior QA Engineer - Agile, SCRUM

£35000 - £50000 per annum + benefits: Ashdown Group: Senior QA Engineer (Agil...

Day In a Page

Read Next
 

i Editor's Letter: We are winning the fight against extreme poverty and hunger. It's time to up the ante

Oliver Duff Oliver Duff
David Cameron addresses No campagn supporters in Aberdeen  

Scottish independence: Cameron faces a choice between destroying his country or his party

Matthew Norman
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week