I certainly agree with my hon. Friend. We already have enough geographic and regional divisions in this country, and I do not want their number to increase. Of course, when we legislate we must be aware
of the different impacts that the measures that we introduce may have in the country of the United Kingdom, both its regions and its nations. However, there are many places in the United Kingdom where few people will pay inheritance tax, and in the country as a whole, without the changes that would be brought about by the Bill—if the House were to pass them, which I hope it will not—it is forecast that 63,000 estates would have a tax liability by 2020-21. According to the House of Commons, the proposed changes would reduce that to about 37,000, the same level as now.
In absolute terms, 37,000 represents quite a lot of estates, but in proportionate terms it is a very small amount—well below 10%—and in the case of many of those estates, the tax is payable because of a windfall. For many people—again, not all of them—that windfall was brought about when they bought their houses with mortgage interest relief at source: MIRAS. Those people acquired an asset which upon their death, after a secular rise in house prices, led to inheritance tax being a liability, and they acquired that asset with the help of the state; in other words, the help of the taxpayer. Now some of them cavil at inheritance tax, which I think is very unfortunate.
The effects of the proposed inheritance tax changes could be wider than the Government may have thought. When we stop and think about it, we must conclude that it is not surprising that many of those who would benefit because their parents have an estate worth more than £650,000 are themselves well-to-do. There is nothing wrong with being well-to-do; all Members of Parliament are well-to-do, and I have been in the fortunate position of being well-to-do for most of my life. However, when a Government propose a tax regime in which they will favour those who are already favoured, we really have to question their priorities.
The Government’s proposals will make inheritance tax more complicated, and it is already fairly complicated. Successive Governments—the Labour Government under whom I was a Back-Bench MP, the Conservative party which was then in opposition, the coalition Government whom we have just seen and, I venture, the current Government, and certainly the current Opposition—have wanted a simpler tax regime, but that is extremely difficult. We have a Finance Bill, the second of this year, which is about a centimetre thick and runs to more than 200 pages. I am not a tax expert or an accountant, but as far as I can tell, it is owing to the cunning of professional accountants who, quite legitimately, provide tax avoidance advice that we have to keep introducing loophole-closing measures that complicate the tax system. The Government are making the inheritance tax regime more complex in a way that is unfair because it favours those who are already well-to-do. The combination of forgone tax revenue and additional complexities does not amount to a desirable policy.
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Moreover, the policy could push house prices even higher, both in the home counties—including the constituency of the hon. Member for St Albans (Mrs Main)—and elsewhere, but particularly in London and elsewhere in the south-east. Those who have the necessary liquidity may decide to invest in real estate, so that when they die, their linear descendants will have the advantage of the
home exemption. We could see a development that many Labour Members would consider to be a strange social phenomenon. At a time when there is a housing crisis—and I think that Members in all parts of the House recognise that there is a housing crisis in many parts of the United Kingdom—the Government are proposing an inheritance tax policy that could encourage those in the later years of their lives not to downsize but to trade up, because if they sink enough money into their houses, more of their estates will be tax-free when they die.
A change is already taking place in relation to agricultural land, which is making it harder for UK farming to be self-sufficient, and this change will have the same effect, to a greater or lesser extent. I can produce no figures to demonstrate how it will work out, but it is very likely that it will increase house prices rather than decreasing them. Similarly, the measure allowing pensioners to spend their money on a Lamborghini, as a former Minister famously put it—or on whatever they like—is also likely to lead to an increase in house prices, because some pensioners who gain access to their pension pots and wish to secure an income stream will buy a house or houses for buy-to-let purposes.
I think that the Government have got the balance wrong between the freedom that we want to extend to people and the recognition that we have—particularly, but not solely, in London and the south-east—of a housing crisis that is predicated on a shortage of housing: a shortage that has, I hasten to add, built up over the last 30 or 40 years. It is not just a phenomenon of the coalition Government of 2010 to 2015, or of the six months of the current Conservative Government. We have not been building enough houses, which is creating huge pressure. I shall return to that subject later, although not in the context of inheritance tax.