Kemi Badenoch to pledge inheritance tax cut in Tory conference speech

Kemi Badenoch will promise to cut inheritance tax in her first keynote speech to the Conservative Party conference as leader, framing the move as part of a "battle of ideas" over the size and reach of the British state.

The Tory leader is expected to use her platform in Birmingham on Wednesday to draw a sharp ideological line between her party and the Labour government, accusing ministers of believing that "your income, your pension and your savings are theirs to take."

While some wings of the party had pushed for the complete abolition of inheritance tax, Badenoch is expected to propose a more cautious reduction. The tax is set to raise more than £10 billion for the Treasury next year, climbing to £15 billion a year by the end of the decade. Scrapping it entirely would leave a massive hole in the public finances. Instead, The Times reported that Badenoch is likely to target a cut to the 40% rate, or a change to the thresholds at which the tax kicks in.

Currently, inheritance tax is charged at 40% on estates worth more than £325,000, though this rises to £500,000 if a home is left to direct descendants, and up to £1 million for married couples.

Despite being one of the UK's most unpopular levies, very few families actually pay it. Helen Miller, director of the Institute for Fiscal Studies, noted that only about one in 20 estates end up paying the tax, meaning "most people don’t go anywhere near" it.

Funding the promises

To counter accusations of making unfunded spending pledges, the Conservatives are set to publish a "savings plan" alongside the speech.

The party needs to show how it would pay for both the inheritance tax changes and a £2.3 billion cut to employer national insurance for young workers, which it announced on Tuesday. Shadow work and pensions secretary Helen Whately said she has identified "billions more" in welfare and government spending cuts, building on the £47 billion in savings the party claimed to have found last year.

'Battle of ideas'

In extracts of her speech released overnight, Badenoch warns that the country faces a fundamental choice about the role of government.

"There is a fight coming in British politics," she will say. "A battle of ideas... between a government that wants to wind back the clock to failed ideas of the past" and a "renewed Conservative party fighting again for the belief that what people earn belongs to them, not government."

She will accuse Labour of relying on the "central planning of bureaucrats" and warn that their policies will ultimately make the country poorer.

A new direction?

The speech is a major test for Badenoch, who is trying to rebuild her party's reputation after its heavy election defeat. She has spent the conference attempting to distance her leadership from the record of recent Conservative governments, telling broadcasters that the party is under "new management" and comparing herself to a new football coach and captain.

Voters, however, remain sceptical. A YouGov poll published this week suggested that 46% of people believe the Conservative party has not changed under her leadership, compared to 30% who believe it has.