Treasury 'proves' death tax cut wasn't 'stolen'

Ministers at the Treasury did consider cutting inheritance tax before the Conservatives announced plans to abolish it for all but millionaires.

Documents released under the Freedom of Information Act show ministers first discussed inheritance tax reform in January this year and advice was given ahead of the Budget in March.

This advice was re-sent to the new chancellor Alistair Darling on July 27th and he asked for the final proposals for inheritance tax reform on September 5th.

However, the Treasury has refused to release details of the contents of these documents, leaving it unclear whether ministers had intended to significantly raise the inheritance tax threshold before the Conservatives crowd-pleasing announcement.

The Conservatives saw their popularity in the opinion polls rise dramatically after shadow chancellor George Osborne announced at the Tory conference he would lift all estates valued below £1 million out of inheritance tax.

Mr Darling then announced his own reform of inheritance tax in October's pre-Budget report.

The chancellor said married couples would be able to combine their £300,000 allowance, creating a new inheritance tax threshold of £600,000 for widows and widowers.

The Conservatives promptly accused the government of "stealing" their policies.

In an openly hostile debate this week, David Cameron challenged the prime minister to look him in the eye and promise the government had planned to cut inheritance tax before the Tory announcement in Blackpool.

Papers released to the Daily Telegraph confirm the Treasury had at least considered the possibility.

The Treasury response reads: "We have records of officials considering the proposal on January 9th 2007. Advice on this measure entitled 'Workstream H: Measure 1220 - Inheritance tax transferable nil-rate bands' was sent to Treasury ministers as pre-Budget advice on March 6th 2007.

"You asked when the current chancellor first considered these proposals. Following his appointment, the chancellor received the above paper on July 27th 2007. The chancellor confirmed that this measure was under discussion for the pre-Budget report on August 20th 2007. Advice on 'Inheritance tax (IHT): transferable allowances' was received by the chancellor on September 3rd 2007.

"The chancellor responded to this advice on September 5th 2007 asking officials to work up final proposals. Subsequent detailed costings followed before the pre-Budget report set out all details on inheritance tax reforms on October 9th 2007."

The Conservatives point out the Treasury have not produced any of the original documents, nor said when the final decision was taken.

Mr Osborne said: "The only thing we discover today is that the first time Alistair Darling showed any interest in inheritance tax was on August 20th three days after a Conservative policy group recommended a cut in inheritance tax and just one day after I wrote a newspaper article entitled 'We will scrap death tax on family homes'. What a coincidence.

"This was supposed to be the moment when Gordon Brown re-launched his government. But instead of setting out his long-awaited vision for Britain, he ends the week following the agenda set by the Conservative party. This is a Gordon Brown own goal."

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