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Is it a big state in your pocket…?

It is a common occurrence on this blog to point out how the Labour government blatantly pursues its socialist agenda. Yes, I am using the S-word in relation to the party that has been polished and spun by the likes of Peter Mandelson and Tony Blair for the public consumption. Today after reading the Sunday Telegraph, gloom descended upon me in an almost David-Carr-esque manner.

The Labour government, true to its socialist DNA, is making headlines again with its penchant for tax increases. The front page announces that inheritance tax is to rise to 50 per cent for those whose inheritance exceed a limit set by socialist bureaucrats or worse yet, a bunch of self-righteous lefties. Institute for Public Policy Research that came up with the scheme is indeed firmly wedged in the socialist utopia:

Inheritance tax needs to be made fairer, according to a new report from the Institute for Public Policy Research (ippr), published next week. The report recommends a tax cut for middle class families, with extra revenues raised from the wealthiest invested in assets for the poorest children.

Ah, children. Beware of ‘children’ mentioned in any political context.

A fairer inheritance tax would see the very wealthy, who are comfortably over the threshold, pay more, whilst the vast majority of families that are currently taxed would pay less.

Again, a fairer inheritance tax. Fairer to whom? To those who build up assets during their lifetime so they can choose to pass them on to their children? And, pray, what is that ‘threshold’, which the very wealthy are comfortably over?

The quotes read like passages from an old Marxist-Leninist textbook, the problem is that they originate from an institute whose former director, Matthew Taylor, is now the head of policy unit at No 10 Downing street. It has been suggested that the scheme may be a “big idea” for a third Labour term in power.

But the Labourites are not yet finished with the Middle England and with anybody who either owns a roof over their heads or stands to inherit one. Northern Ireland minister admitted there will be significant shifts in rate bills [local government tax], particularly at the top end of the market.

It is only fair that those who can afford to pay do pay a fairer share as soon as possible.

Here we go again, talk of fairness… fair to whom and fair by whose definition? Who are these guardians of fairness and equality that they feel confident to define how much I get to keep before I am forced to pay a fairer share? These are the very same people whose existence and – dare I say it – salaries depend on the money that are extracted from all of us to self-righteous noises about ‘schoolsandhospitals’.

For once, the Tories managed a sound-bite:

It is becoming clearer by the day that Labour are planning third-term tax rises to feed their appetite for fat government.

The only thing that is not clear to me is that how Labour’s propensity for taxation and fat government has not been clear to everybody all along.

31 comments to Is it a big state in your pocket…?

  • Ted Schuerzinger

    Every time the word ‘fair’ is used in discussing tax policy, I want to ask why the taxers wish to impose their morality on the rest of us. 🙂

    Seriously, inheritance tax is based on the morally wicked proposition that it is appropriate for Big Government to decide how much you should have, and punish you if you have more than that. And when fighting such odious taxes, we really ought to be using words such as ‘wicked’.

  • R C Dean

    Where I come from, “fair” and “equal” are nearly synonymous. The use of “fair” to mean unequal is literally Orwellian.

  • John Harrison

    ‘Fair’ is used because it is a convenient hooray word, like ‘children’. It obscures the real agenda but people not paying too much attention will all agree that we need a ‘fairer’ tax system. Surely no-one reasonable would disagree with that.
    It is one of those words which shapes the political agenda when, without being questioned, it becomes part of the context in which debate is phrased.

    Alerting the public to the idea of ‘Fat Government’ is the next logical step from hammering home the story about ‘stealth taxes’, which I believe is now well accepted as part of public discourse. (Another Letwin-ism I believe)

    The Conservative Party are most convincing when they are self-evidently telling the truth and building a convincing narrative about the society we live in.

    Let’s hope ‘Fat Government’ becomes a familiar part of the political lexicon. It provides a powerful weapon with which to beat Labour and if the Conservatives attain power, it will be difficult to make the phrase go away without the Conservatives slimming down the state.

  • The Wobbly Guy

    The only thing that is not clear to me is that how Labour’s propensity for taxation and fat government has not been clear to everybody all along.

    Never underestimate the extent of human stupidity. It’s endemic everywhere.


  • I like the comment about “Fat Government”, but I suggest a modification. I’d suggest Labour are creating “Fat Intrusive Government”. The intrusive part can be seen in everything from their micromanagement of schools to the assault on civil liberties.

  • Johnathan Pearce

    If the looters decide to continue stealing from Middle England, then the Tories will have few excuses in not making headway against Blair and co in the polls.

    Of course Blair loves inherited wealth, particularly so that he can sponge off the rich to have his holidays in the sun.

  • ernest young

    Why are you all complaining about 40% death duty, (it’s original name), didn’t it used to be 60%, or even more? and how about personal tax at top level of 97.5%…. it wasn’t that long ago… yes, I know it is not right to have a death duty, but we have it and it isn’t going away soon, it’s Socialist dogma, it’s written in blood, yours, not theirs…

    I remember headlines about all those owners of stately homes, who were forced to open them to the public to help pay off the tax bill when Lord SaggyBottom ‘kicked the bucket’.

    Do you remember all the sympathy for those ‘poor’ rich folk? all ‘land rich,and cash poor’, wasn’t it a shame that they had to actually do some real work, or at least had to hob-nob with all of us proles.

    When you live in a big State, socialist country, which the UK has been since the early twentieth century, you have to expect such thievery.

    That saying about, ‘you can’t take it with you’, should really read, ‘They wont let you take it with you!’.

    Everything that the ordinary man has, is only lent to him, (by the State), and, one way or another, they will take it all back. ‘Tis the nature of the beast!’.

  • Julian Morrison

    It’s kind of encouraging they’re back to open socialism. They’ve run out of options for stealth taxes. Their nature should become increasingly aparrent even to the hard-of-thinking.

  • John Ellis

    [quote]And, pray, what is that ‘threshold’, which the very wealthy are comfortably over?[/quote]

    About £750,000. Not much for many here, but for lesser mortals, the state take is the same or lower.

    I agree inheritance tax is conceptually flawed however. The reason behind it (as noted partially above) is so that large landowners (who did no salaried work, and therefore paid no income tax) paid – eventually – something towards state revenues. A better way (and one that would have helped preserve estates over the generations) would have been a moderate annual assessment levied on assets held. I don’t expect the contributors here to be too keen on that, either!

    Nowadays, the tax catches even the smallish guy, and I guess that is why the government are considering (it’s only a think-tank report, not policy yet) graduating it more and raising the allowances, but making the higher band more severe. They suppose that those with assets over £1m are unlikely to vote Labour anyway, but “Middle England” is not quite that rich yet – and that is where the votes that count lie.

  • Jacob

    Fat government ?? Obese government !

  • The error here is that there arehundreds of thousands in the Home Counties and other housing hotspots whose only asset,their home, exceeds the inheritance tax threshold. This is a vote loser par excellence,middle Britain put this lot in and will throw them out again.
    Labour is now being honest about its taxation policies having lied the first term , pretending that to be Tory Lite,the whole purpose of the first term was to get re-elected a second term.
    They have obfuscated for the second term but are now showing up as Red in tooth and claw.Remember all those “loony leftist” we laughed at years ago,well folks,they are the Government now.

  • Verity

    Peter – yup. But some people were thick enough to be taken in, which baffled me at the time, and astounded me when they voted them in a second time.

    The Socialists will financially wreck this present generation of young/middle aged adults. They are already a lost generation as far as financial independence goes. They voted for the fox to come in with a sympathic team of lesser fox accountants, all businesslike and talking the talk,
    to take charge of the hen house.

    Middle Britain’s savings accounts and financial plans are being vacummed for taxes to pay for programmes they would never have funded had those programmes been presented honestly. Why didn’t they spot the obfuscations? Many of us did.

    Why were they so willing to believe that a political party historically viperously hostile to private enterprise, private education and financial independence had inexplicably seen the light in the person of such an obvious snake oil promoter?

    Those who voted for them deserve their fate for having been so willing to have been tricked. This is how carnies think about marks at a carnival. They deserve to lose.

  • John Ellis: The threshold is £763,000 (it’s in the article linked) and mine was a rhetorical question…

  • James,

    Rather than “fat intrusive government”, may I suggest “fat obnoxious government”? It immediately brings a certain type of person to mind, which helps when trying to capture people’s imagination.


    > The reason behind it (as noted partially above) is so that large landowners (who did no salaried work, and therefore paid no income tax) paid – eventually – something towards state revenues.

    Hmm. I always thought its main reason was to break the aristocracy’s cycle of inherited wealth. I think the reasoning was always more to do with ensuring that certain people had less money than it was to do with raising money for the state. And I have to say I agree with it on those grounds. Early-Twentieth-Century Britain was dominated by those who had been passing on their wealth for generations — effectively those whose ancestors had been approved of by one monarch or another — and used it to control the country. I think that we needed a period of redistribution to redress the balance and create a system where the poor could become rich — and vice versa. That time is, of course, long gone. The question I have for modern socialists is, where are these modern lords whose power base needs to be broken? This country is no longer controlled by the aristocracy, so why does this tax, a measure for breaking the aristocracy’s power, still exist? Almost everyone in Britain who owns an expensive house has worked for it.

  • ernest young

    Squander Two,

    Almost everyone in Britain who owns an expensive house has worked for it.

    The main reason for house values rocketing is the abnormally low interest rates, and the lack of anywhere else to invest savings. To claim that the increased value is due to the ‘hard work’ of the owner is largely nonsense. We all have to live somewhere and pay for the privilege. You’ll be expecting brownie points for breathing next…

    I see you agree with income redistribution, as long as it doesn’t apply to you, – very interesting!

  • thomasd

    Ernest Young,

    Yes, some people have done pretty well out of rising property prices, but this is still off the back of a significant initial investment. Also, I think you’re missing one of the biggest factors in rising UK house prices, which is that the supply is so constrained, mainly by planning policies which now make it well-nigh impossible for a normal guy to go out and build a new house.

    Does any of this really justify extra confiscatory taxes for anyone who wants a roof over their head?

  • ernest young


    No, of course it doesn’t, and I was not trying to justify the tax.

    It has never been easy to save the deposit for that first house, when I was staring out on the ladder it was quite normal to work at several jobs to get that deposit, and interest rates were in double digits, but at least when I put money in the bank as savings it earned a decent return.

    I am sure that it is just the same now, the sense in paying a mortgage, as averse to paying rent has more validity now than then, particularly when the rate is so low… whether we rent or buy, we all have to pay for that roof over our heads in one way or another…

  • R C Dean

    To claim that the increased value is due to the ‘hard work’ of the owner is largely nonsense.

    So? Is any return on investment therefore fair game for confiscatory taxes?

  • > To claim that the increased value is due to the ‘hard work’ of the owner is largely nonsense.

    I’d be fascinated if you could point out where I mentioned either the increase in house values or how that increase is caused by the owners’ hard work.

    > I see you agree with income redistribution, as long as it doesn’t apply to you

    As it happens, I’m rather poor. Income redistribution certainly does apply to me: I was on its receiving end until a few weeks ago. Yet I’m still against it.

    Britain’s traditional social system, of a handful of families having absolute power over the peasants, was hardly libertarian. Redistributing the wealth of those powerful families, thus enabling the peasants to achieve freedom, was a move towards a libertarian society. As I said above, I approve of it as a brief temporary measure, but it should have been scrapped long ago, as it achieved its aims.

  • John Harrison

    The one aspect the media seem to have covered is that this is not a significant tax cut at all.

    For those whose estates are under £263,000, there is no reduction because the rate was already 0%

    From £263,000 and above there is a small reduction up to the upper threshold where the 50% tax kicks in.

    The Maximum tax cut is (288K-263K)*18% (That’s 40%-22%) = £4500.

    In recent years, house prices have raced ahead well over 10% a year. To keep up with house prices for just one year, the £263,000 threshold should have risen to over £288,000, with a 0% rate, not a 22% rate on the difference.
    So this is two tax rises- one by under-indexing thresholds and the other by introducing a 22% rate on assets that would have been untaxed with full indexation corresponding to house prices – dressed up as a tax cut for the middle classes. Astounding!

  • The problem of analysing the British state under New Labour is more insidious than the visible effects of taxation. It is unclear what the new state outline is: bigger, more centralised, more authoritarian, where public sector professionals have been given latitude to increase their power with funding and regulation. What are the motors? The accumulation of a professional society centred and funded by the state that views an opportunity for extending its power through law and regulation by identifying an ‘issue’ that can only be addressed through state coercion with collective ideological justifications such as protection, social justice, serving the public etc. etc. (Note how these can and will differ, since public sector professionals have different tactics and concerns).

    The increase in taxation is New Labour’s race to catch up with the demands of its social base, fed by the increase in public employment and regulation.

  • John Ellis


    The threshold is as you say. I didn’t have the article in front of me, which was why I said “about £750,000”. Sorry, I didn’t pick up on the rhetorical nature of your comment, as you asked the question, but didn’t answer it. I was trying to add some light to the issue.

    Squander Two,

    I think you are right. The underlying issue, perhaps, was “fairness”, which was seen to indicate both a breaking of aristocratic power and a demand for those living off inherited aristocratic estates to contribute to the Exchequer. I am not a student of the period, and your analysis is probably the more thoughtful.

    (I “inherited” my view from my parents, and like much that is unearned, it led me into lazy habits!)



  • ernest young

    Squander Two,

    Almost everyone in Britain who owns an expensive house has worked for it.

    I’d be fascinated if you could point out where I mentioned either the increase in house values or how that increase is caused by the owners’ hard work.

    Sorry, I see that wasn’t quite what you said, (see first quote), I was drawing conclusions, and was making the assumption that those expensive houses were not expensive when they were first purchased. The remark re ‘hard work’, was really in reply to an article on another blog… apologies ! but nevertheless it applies to a lot of the thinking on this thread.

    R C Dean,

    So? Is any return on investment therefore fair game for confiscatory taxes?

    No it isn’t, but investment returns are usually based on a risk reward basis, and you would hardly call buying yourself a roof over your head ‘a risk’, it is a necessity. There is many an entrepreneur who would love to have a 20 – 25% capital increase or net profit per annum…owning your own house is a licence to print money, and long may it continue, but it wont, because ‘they’ have all that lovely cash in their sights, and you know you cannot be trusted to spend it wisely…

    To listen to many folk, you would think that they had done something extraordinary, just by sitting on their bums doing nothing, and good luck to them, but I do get irked by the cloak of self-congratulatory smugness they wrap themselves in, not that it is any reason to tax them for their good fortune. They attribute their increased wealth to their inate ‘cleverness’,or ‘hard work’, when it seems that you would have to be pretty unfortunate, under the present circumstances, to show a loss.

    I reiterate, I am just as opposed to any taxation, as anyone here, while realising that some form of taxation is inevitable, if only to pay for our military…

  • thomasd

    No it isn’t, but investment returns are usually based on a risk reward basis, and you would hardly call buying yourself a roof over your head ‘a risk’, it is a necessity.

    Actually, I’d disagree here. There’s a very real risk that house prices could go down. It certainly wouldn’t be unprecedented. For the (vast majority) of British mortgages which are totally variable-rate, there’s also the possibility of a future Monetary Policy Committee playing fast and loose with interest rates. And while the roof is a necessity, it’s possible to avoid some of the risks by renting.

    Of course houses have, in recent years, greatly outperformed most other forms of investment. I’d still move that this is almost entirely an artifact of the planning process. I certainly don’t believe that the current price levels would last five minutes if a dose of libertarianism hit local councils.

  • ernest young


    Of course there is a risk that prices will fall, they did in the 80’s and in the late 60’s, so what if they do?, it only makes a difference if you need to sell up and move. You still need somewhere to live, and it will cost you either way, whether you rent or pay a mortgage.

    In fact it will be very surprising if prices do not retract to some degree, which will put new owners ‘upside-down’.

    Even if interest rates went to double digit figures, it would probably only hurt the ‘second home’ investor, as first mortgages can alway be refinanced to make repayments easier. And we are talking about home financing here, not investment financing. If loans have been leveraged in an irresponsible way, then the lesson will be learned that ‘real’ investments involve risk.

    Do you honestly think that Local Government will ‘see the light’, I don’t, the only way they will alter their spendthrift habits, is for some major financial collapse to take place. Then everyone will suffer, and we will have bigger problems to worry about, other than the mortgage.

  • The UK housing market is out of kilter with the rest of Europe,Gordon Brown wants to equalise this in preparation for entry into the Euro.
    Keep an eye open for other measures that depress house prices.

  • Findlay Dunachie

    I think we should ask how much more money would be collected by raising the rate of inheritance tax. We know that raising income tax levels can be counterproductive, though I don’t think it’s known what the optimum level is – it probably varies from country to country. This is the Laffer Curve – but I’ve never seen an illustration from real life, with figures on both axes. The rationale is that when the level reaches a certain height, it becomes worth-while to take measures (e.g., employing clever accountants, lawyers &al) to avoid paying. With Inheritance Tax there are already loopholes and the richer one is, the more these can presumably be worked. What’s the situation now, and what’s a reasonable forecast?
    Despite the fact that lowering top income tax rates has garnered the government more money, I see that there are still suggestions in the Labour Party that they should be raised. Someone’s got it wrong – is it me or them?

  • John,

    I’m not a student of the period either. Don’t go attributing expertise to me that I don’t have. I make all this up as I go along, you know.

  • John Ellis

    Squander Two,

    I’m glad it’s not just me that does that, then…;-)

    If it’s not too personal a question, do you mind if I ask what brought you to this board/blog?

    Sometimes, I’m amazed that I’m still checking it from time-to-time, but it does occasionally spawn an interesting conversation…

  • Blimey. It was ages and ages ago that I first came here, and I can’t remember where the link was from. I do remember that I took one look at the blog and decided it was crap. I think I just caught it on a bad day, though. It has since proven to be non-crap.

  • Paul Marks

    Interestingly many of the same people who support inheritance tax (indeed, now, even higher inheritance tax) are the same people who tend to attack “faceless” corporations where “short term obsessed managers rip off both stock holders and workers……….” where these managers “get their vast pay packages (agreed by other managers, representing institutional stock holders – sitting on the relevant committees) and stock options – which they sell off before the long term truth about the corportation becomes generally known”.

    Of course one of the major reasons that companies become “ownerless” (with most of the shares controlled by pension funds and other such) and under the control of hired managers – is inheritance tax (which has undermined the old system where the people who controlled the company also owned most of it – and were, therefore, concerned with the long term, and were unlikely to rip of stockholders because they were the principle stock holders).

    Another reason for the growth of the “faceless” corporation is capital gains tax. Another thing the “progressive” types support.