The promise of a £1,000,000.00 nil rate band for inheritance tax by George Osborne at the 2007 Conservative Party conference is widely seen as the moment that stopped Gordon Brown calling an early general election and converted a Labour lead in the opinion polls into a Conservative one.
To date, despite much scepticism, the Conservatives have emphasised that the proposed increase in the nil-rate band would remain a key policy if they win the next election.
It is, therefore, of some interest that today, Ken Clarke the new shadow business secretary has described the policy as an aspiration. In the light of the current economic crisis and the likely black hole in public finances that any new Conservative government will probably inherit, I think that there is a good deal of sense in what Clarke says, despite protestations by the party.
It is quite clear that the recession has pushed Inheritance tax down the political agenda as quite literally many more voters have less to fear from IHT especially due to the introduction of the new transferable IHT nil-rate band in October 2007. Conversely, lower property and asset prices have meant that the tax take from IHT over the last 18 months has been considerably reduced and the cost of increasing the threshold to £1,000,000.00 will be somewhat cheaper to the exchequer than it would have been a few years ago.
As a result, it is my hunch that any new Conservative government will aspire to reach a £1,000,000 IHT threeshold during the course of a 5 year parliament and will move in this direction by significant increases in the threshold, each year.
We will have to wait and see whether a Conservative government is elected by Spring 2010 and if so, the policy that is put into effect.
