Now we force Brown to cut death tax

Chancellor Alistair Darling announced an immediate doubling of the threshold for the death duty to £600,000.

He also promised in future to “take both house prices and inflation into account when setting inheritance tax thresholds”.

His surprise move represents a huge climbdown by Gordon Brown in the face of massive pressure from Daily Express readers.

This newspaper’s crusade against the death tax – backed by more than 350,000 people – is widely seen to have transformed Britain’s political landscape.

Last week, the Conservatives turned around months of declining popularity by promising to raise the inheritance tax threshold to £1million.

The move proved so popular across the country that Gordon Brown was forced to shelve plans for an autumn election as the Tories’ approval rating in the polls soared.

Last night, the Prime Minister was accused of executing his most shameless attempt so far to court the middle-class vote by stealing Tory policies.

Shadow Chancellor George Osborne branded the move “a cynical stunt from a desperate and weak Prime Minister” and a “tax con”.

Later he added: “Gordon Brown wouldn’t be even talking about inheritance tax if it hadn’t been for the Daily Express crusade.

“But, unfortunately, if you look at the small print, it’s a tax con not a tax cut for the many hundreds of thousands of people who do sensible tax planning.”

Last night Mr Darling’s boasts of a tax cut did indeed start to unravel as analysts examined the details and confirmed that many families who take financial advice to minimise death duty liability will be no better off.

Carolyn Steppler, tax director at KPMG, said: “This change, although likely to grab headlines, is in practice only giving to most people what they already have.

“Many married couples will already have drafted wills to allow each spouse to take advantage of their nil rate band through the use of a discretionary trust. This was possible even for the family home.

“It is very disappointing to note that the proposals will not benefit unmarried or non-civil partnership couples, or siblings who have lived together as in the recent case of the elderly Burden sisters.

“They had lived together all their lives before one sister faced having to sell the house in her eighties when her sister died.”

Liberal Democrat Treasury spokesman Vince Cable said: “This does nothing for the many families who have separated or chose not to enter into a marriage or civil partnership.”

Ian Maston, director of inheritance tax at tax experts Chiltern, said: “Prudent people would have already arranged their wills to achieve this anyway, so the Chancellor’s announcement won’t save them a penny.”

There was also anger about the many bereaved families on modest incomes who have been hammered by Mr Brown’s death duty stealth tax over the last decade.

Financial experts did confirm, however, that millions of families will now be freed from the threat on the crippling 40 per cent death duty as a result of the Daily Express crusade.

Tributes poured in last night for the paper’s central role in forcing the Government’s hand. Matthew Elliott, chief executive of the TaxPayers’ Alliance, said: “This announcement is fantastic news for families who deserve to keep more of their own money to pass on to the next generation.

“Thanks to the sustained pressure of Daily Express readers, politicians are now competing with each other to reduce the unfair death tax. Cutting taxes is a vote winner, and just what hard-pressed families need.”

John Riches, of the Society of Trust and Estate Practitioners, said: “Middle England will breathe a sigh of relief at the Chancellor’s reforms, due in large part to the political pressure created by the Daily Express crusade.”

Mr Darling’s inheritance tax plan – revealed in his autumn statement  – caused astonishment on both sides of the Commons.

His announcement went much further than expected, as many financial experts had forecast that the Treasury would spend months reviewing inheritance rules.

Instead, Mr Darling, in his first set-piece Commons occasion as Chancellor, announced an instant shake-up.

Under the Chancellor’s proposals, married couples and civil partners will have a combined inheritance tax threshold of £600,000. That figure will rise to £700,000 by 2010.

It means that couples can transfer their tax allowance to their partners, so the 40 per cent levy will not be charged on the first £600,000 of their estate.

The allowance will also be backdated, so hundreds of thousands of widows and widowers will benefit from the move. He claimed his measures were “fair and affordable”.

But the move represents a massive turnaround after Labour has spent years sneering at calls for the ever-tightening tax threat to be curbed. To jeers from Conservative MPs, Mr Darling told the Commons: “I want to ensure that husbands and wives can benefit from each others’ unused inheritance tax exemptions.”

He added: “To ensure that people who have already lost their husband or wife will also benefit, I will backdate this indefinitely for every widow or widower.

“In future we will take both house prices and inflation into account when setting inheritance tax thresholds.”

The Treasury will fund the £1.5billion cost of the tax cut by raising new taxes on foreign tycoons and introducing a green tax on airline flights – both proposals outlined by the Conservatives last week.

The move was being seen as a panic measure by the Government in response to the Conservatives promising to raise the inheritance tax threshold to £1million for all. Mr Darling’s move did not go as far, but millions of middle-income households will still benefit.

In the past, ministers and Labour MPs have sneered at the crusade to abolish inheritance tax. When more than 120,000 backed an online petition calling for the tax to be scrapped, Downing Street replied by claiming that reducing death duty would hit schools and hospitals.

One Treasury official risked ridicule last night by claiming: “The Government always planned to do something to make inheritance tax fairer.”

During Mr Brown’s decade as Chancellor, the Treasury grab from inheritance tax more than doubled to nearly £4billion a year.

He was accused of manipulating thresholds in order to use the levy as a stealth tax on bereaved families.

The move was also an embarrassment for many Labour MPs who support inheritance tax. Just a few hours before the statement, Tony Lloyd, chairman of the Parliamentary Labour Party, warned that a cut in inheritance tax would benefit the better-off.