If you jumped back in time to January 2023, when the Tories were a mere 17 points behind in the polls, you would undoubtedly have heard, “Oh, but the polls will tighten before the election.” Twelve months on and we are facing an election year. The Conservatives’ position has not changed and the Party needs eye-catching ideas. But still, suggestions are being thrown up that offer little to the majority of the electorate.
The position of the Tories among young voters should be cause for serious concern. Without trying to appeal to this group, the route back to power after an election defeat is significantly hindered. It might be cliché to say, but young people really are the future. According to the latest YouGov polling, fewer than 10% of 24-49-year-olds are planning to vote for the Conservatives and only 4% of 18-24-year-olds will be doing the same. For the least affluent, only 14% are looking to vote for the Tories in the next election.
It is not rhetoric that will change the voting behaviour of these demographic groups, but active policy solutions that improve their condition. Many graduates are facing a marginal tax of 55% before they get a chance to spend or save. How can we expect them to get on the housing ladder, establish businesses, save money and start families if the monetary means are not present? Meanwhile, just over a third of UK adults have less than £1,000 saved and two-thirds believe they would not last three months without borrowing money.
Instead of prioritising the least affluent groups in our society, the Government appears to be looking in the opposite direction, to localise wealth and opportunities in the hands of those who already have it. Indeed, the Telegraph has recently reported that in the 2024 Budget, plans are being drawn up to end inheritance tax.
Those from the bottom fifth of the wealth distribution born in the 1980s will only get up to a 5% boost to their lifetime incomes through inheritances. However, for the wealthiest fifth, inheritances will increase lifetime incomes by almost 30%.
Quite often, arguments for ending inheritance tax revolve around helping younger generations to get onto the property ladder. However, the most common age that today’s young people will inherit is 61 years old. We should be encouraging those from younger generations to get on the housing ladder in their 20s and 30s, so they can reap the rewards and access wealth throughout their career, not when they are on the verge of retirement. As was rightly argued by Demos, “the best way to help is to find ways to boost their earnings.”
The Government should be focusing attention and resources on building up wealth for those with little or none of it, rather than giving a tax cut to those already with plenty. This would not only be the right thing to do but also avoid further alienating future voters. Indeed, the public supports the idea of cutting taxes on work, with just shy of 50% of the UK public believing that Income Tax for those in the lowest tax bracket should be the first tax cut.
Cutting taxes on work would be a far more just policy than the Government’s current plans to scrap inheritance tax. It would improve opportunities to save for those whose incomes are being eroded by a cost-of-living crisis outside of their control and the highest tax burden in decades. Moreover, it would open up opportunities to put money towards a house deposit, entrepreneurial endeavours and family beginnings.
Despite an improved fiscal position over recent months, to have a meaningful reduction in taxes on work, funds would have to be replaced from somewhere.
So where to start? We should look to close the unjust loopholes in the current inheritance tax system. Often, larger estates pay a lower effective inheritance tax rate than smaller estates. For those estates valued at £2.5 million, the average effective tax rate is 25%. Yet, estates worth £10 million pay only 17% on average. Unjust loopholes, such as the exploitation of agricultural and business property relief must be addressed.
Agricultural property relief costs the Treasury almost £500 million annually and allows landowners to pass it on without an inheritance tax charge. But this is often exploited, with investors taking advantage and buying agricultural land to obtain relief. As such, in 2017, only 40% of agricultural land was bought by farmers.
Concurrently, business property relief, which costs over £1 billion, applies to the value of shares in a company with no family connection. Additionally, an individual could sell a business immediately after inheriting without it changing their tax position.
Tax reliefs should not be used as a tool for the wealthy to reduce their tax bills and widen wealth inequalities. Closing them for those with no meaningful ties to a business or land would be an equitable way to share wealth and ensure better opportunities for younger generations to access and benefit from wealth. This, alongside other measures, such as narrowing the tax gap between earned and unearned income would provide a pathway to reduce the tax liabilities for younger and lower-income voters, ensuring that people are better able to enjoy the fruits of their labour.
To avoid a prolonged period in the political wilderness beyond 2024, the Conservative Government has to do something to improve its standing with younger and less affluent voters. Rather than entrenching wealth and opportunities with those who already have it, policy should seek to support the acquisition of assets and wealth for those who are not lucky enough to be born into it. Reforms to inheritance tax are needed, not its abolition.
Thomas Nurcombe is a Researcher at Bright Blue.
Views expressed in this article are those of the author, not necessarily those of Bright Blue.
