HC Deb 12 May 1988 vol 133 cc452-3
4. Mr. Andrew F. Bennett

To ask the Chancellor of the Exchequer what is his latest estimate of the financial effect on the Exchequer in a full year of the changes in inheritance tax announced in the Budget.

Mr. Norman Lamont

The full year cost is £220 million measured from an indexed base.

Mr. Bennett

Does the Minister accept that that is a substantial sum and that for an estate worth £1 million the tax bill has now been cut by £148,000? How can the Government justify giving money away in that way? Surely incentive is not an appropriate justification. Would it not have been better to help those of my constituents who have lost housing benefit and rent rebates? That would be a much more appropriate way for the Government to spend money than to give it to those who are already well off.

Mr. Lamont

If the hon. Gentleman had been here earlier this week he would know that we debated that matter fully. Several of my hon. Friends made the point that the incentive to hand on money is one of the most important incentives for keeping businesses together, and we believe that that contributes greatly to the incentives that are necessary for the growth of our economy.

Mr. Nicholas Bennett

Does my right hon. Friend agree that the difference between Conservative and Opposition Members is that Conservatives believe that income tax and inheritance tax relate to money that belongs to the individual, whereas the Opposition believe that it belongs to the state and that we should be given back only a little pocket money?

Mr. Lamont

My hon. Friend is entirely right. He might also have added that if we had punitive rates of inheritance tax we would probably find that we raised less money, because since we started cutting the rates of inheritance the yield has gone up.

Dr. Marek

What conceivable reason is there for the Chancellor to give away money on estates worth £1 million and more to the super-rich, who do not need it? It cannot be because there will be any incentive. It cannot be because it will attract other people to Britain. The Minister has admitted that it is a loss to the revenue. Is it not a theft of public money from the Treasury to give to people who have far too much already?

Mr. Lamont

The hon. Gentleman entirely ignores the fact that the money is the taxpayer's in the first place. What conceivable reason is there to want to break up existing family businesses?

Mr. Carrington

Does my right hon. Friend agree that one of the most welcome aspects of the changes in inheritance tax is that the effective rate, taking into account the business property relief on the transfer of small businesses to the next generation, is now below 20 per cent.? Is this not a great encouragement for the formation of small companies, as well as for the prosperity of coming generations?

Mr. Lamont

The Government have very much altered the nature of inheritance tax, not only with the change to which my hon. Friend refers, but with the provisions for lifetime giving. It seems to escape the notice of Opposition Members that the burden of inheritance tax at the lower end was such that, because of increasing house prices, it was hitting many people of comparatively modest means.