The Tories should back the middle classes

Earlier this week, the broadcaster Anne Robinson revealed that she had given away much of her wealth to her family to save them from having to pay inheritance tax on her fortune after her death. It was a striking example of the way in which death duties distort behaviour. Inheritance tax can compel individuals to make complicated and sometimes perverse financial decisions in order to prevent money that has already been taxed from being taxed again after they have died. It can also disincentivise saving in the first place.

It is welcome that Jeremy Hunt, the Chancellor, appears to recognise this. In an interview with this newspaper, he calls inheritance tax “pernicious” and “profoundly anti-Conservative”, in a reassuring sign that he understands why so many voters object to the levy so passionately. In the grand scheme of things, it raises comparatively little. But it hits individuals at a particularly painful moment with an unfair duty that can force them to sell assets like the family home.

In the interview, Mr Hunt also reflects that more must be done to clear up the distortions in the tax system that can result in taxpayers earning between £50,000 and £125,000 paying extortionate marginal rates. This again affects behaviour, leaving people less willing to take on extra work, seek a promotion, or find a better-paying job. They are allowed to keep too few of the fruits of their own labour, and quite reasonably feel resentful.

It would be fair to say that, over the past few decades, the middle classes have been somewhat overlooked by the political class. Priority in Budgets has been given to boosting the incomes of the lower-paid, through measures such as increasing the minimum wage and lifting the personal allowance. Middle and higher earners have been expected to take on an increasing proportion of the burden for funding public services.

But the middle classes are the backbone of the British economy, as well as being historically an important part of the Tories’ core vote. The party should be looking to put support for their interests at the heart of its general election manifesto.

There could also be electoral dividends in reviving the old Conservative mission to expand the middle class, by rebuilding Britain’s property-owning democracy. Instead of discouraging people from saving, providing for themselves and their families, the Tories should be introducing a new generation to the benefits of home ownership and wealth accumulation. It was a political formula that worked for Margaret Thatcher. There seems little reason why it would not work again.