Clause 115 - IHT: rate bands

Part of Finance Bill – in a Public Bill Committee at 6:15 pm on 18 June 2002.

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Photo of Ruth Kelly Ruth Kelly Financial Secretary, HM Treasury 6:15, 18 June 2002

We have had a very interesting debate on inheritance tax, with contributions from many Members. I am grateful to the hon. Member for Mid-Worcestershire (Mr. Luff) for reminding the Committee that in the Budget the Chancellor raised the rate at which inheritance tax becomes due from £247,000 to £250,000. I would like to remind the Committee that the legislation says that the inheritance tax threshold, along with other tax measures, rises with inflation unless otherwise specified by the Chancellor. The Chancellor specified otherwise this year. It is useful to set the recent modest increase in context.

I am also grateful to the hon. Gentleman for reminding the Committee that various organisations and representative bodies, and indeed hon. Members, make different predictions about what will happen to house prices. While some claim that house prices may rise because of the buy-to-let phenomenon, others argue that house prices may be about to suffer a sharp correction. It would be wrong to infer too much about future policy from the recent increase in house prices. The Government take a longer-term view, rather than acting on the basis of last month's—or last year's—figures, and I very much hope that we continue to do so.

It might have been useful had the hon. Gentleman also reminded the Committee that this modest measure still raises £2.5 billion for the Exchequer each year. That is the latest estimate for the revenue from this measure that we have for the current financial year. The hon. Member for Cities of London and Westminster (Mr. Field) and others who propose the abolition of inheritance tax must argue for a replacement source of finance, otherwise it would be only right if my hon. Friends were to tally up the spending commitments in this Committee and hold Conservative Members to account at a later date, a point ably made by the hon. Member for Kingston and Surbiton (Mr. Davey).

The right hon. Member for Fylde, as well as the hon. Member for Kingston and Surbiton, argued on several fronts that the tax was somehow historic and a hangover from the past with no relevance today.