The Conservatives were accused on Sunday night of being in “disarray” over their tax cutting promises after Ken Clarke said their flagship inheritance tax pledge was no longer a “high priority”.
The commitment to remove all but millionaires from inheritance tax was one of George Osborne’s defining decisions as shadow chancellor, helping the Tories to stall the momentum for an early election in 2007.
But Mr Clarke, the shadow business secretary, cast doubt over the landmark policy, saying the party would have to consider when it could “afford” the tax-cutting “aspiration”.
On Sunday night a Tory spokesman said the tax cut would be a manifesto commitment and remained “a promise we will keep”. But he refused to confirm whether it would be included in the first Tory budget, suggesting its implementation could be delayed for up to four years.
The move fits with David Cameron’s efforts to play down the economic expectations of the electorate, with warnings of how difficult it will be to avoid tax rises and spending cuts.
What the Conservatives pledged
●Scrap tax on saving for basic rate taxpayers and increase personal allowance for the over-65s
●Increase the inheritance tax threshold to £1m
●Axe stamp duty for first-time buyers on homes up to £250,000, a move costing less than £400m
●Cut the main rate of corporation tax from
28p to 25p and the smaller companies rate from
22p to 20p
●Implement Labour’s proposed 45p rate of income tax for people earning more than £150,000
Dropping the firm commitment to implement the inheritance tax pledge is likely to aggravate Tory rightwingers, who have already criticised the leadership’s decision to implement Labour plans to raise income tax to 45p on some high earners.
Last week Mr Cameron abandoned the pre-recession policy of “sharing the proceeds of growth”, in a significant shift in tone for the party. But the commitment to inheritance tax cuts had remained, primarily because it marked such a turning point in the party’s fortunes.
Labour claimed Conservative pledges were “falling apart” under scrutiny amid “disarray” over who was setting policy. Angela Eagle, Treasury minister, said: “We’ve been calling on the Tories for months to scrap this unfair giveaway to the wealthiest few thousand estates. It’s good that Ken Clarke is starting to listen, but what about David Cameron and George Osborne?”
Although Mr Clarke’s intervention mirrors the Tory leader’s change in approach, it is unclear whether his comments were agreed with colleagues. He told the BBC: “I don’t think we are going around any longer saying this is something we are going to do the moment we take power. We will have to consider when we can afford to do that. I don’t think anyone is saying any different to that.”
The public finances left by Labour would prevent inheritance tax being made “the highest priority when we get in”, he added.
Last night Mr Clarke issued a statement clarifying his position, saying he could not see ”any significant difference” with what his colleagues had said in the past. ”This measure will appear in the manifesto and I support it. We also all agree that George Osborne cannot write his first Budget until we have seen what we have inherited,” he said.
Lord Mandelson, the business secretary, said his words only proved that the Tory plans had been thrown into ”confusion”. “The thing about Ken is that he just cannot help but say what he thinks,” Lord Mandelson said.
As late as last month, Mr Cameron refused to consider scrapping or delaying the tax cut, insisting it was “something we want to deliver”. Its cost has almost halved to £1.3bn as a result of the recession and falling property prices.
But some senior Conservatives have long been expressing their nervousness about pressing ahead with a tax cut for millionaires, arguing it risks distorting the party’s message in an election likely to be dominated by concerns about economic hardship.
