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Tory taxes

Shadow Business Secretary, Kenneth Clarke, tells the Politics Show that a future Conservative Government would see reducing inheritance tax as an "aspiration".

Ken Clarke MP

The Shadow Business Secretary Ken Clarke has told BBC One's Politics Show that Conservative plans to raise the inheritance tax threshold would not be a priority if they win the next election.

Mr Clarke said that this commitment was now "an aspiration", adding "I don't think we're going round any longer saying this is something we're going to do the moment we take power."

Asked by Jon Sopel if the plan was "off the shelf" he said:

"We'll have to consider when we get in whether we can afford to do that, in my opinion. I don't think Labour's going to leave us in a position where we can do that."

Read the transcript here : Full interview with Kenneth Clarke MP, Shadow Business Secretary .

JON SOPEL: Ken Clarke joins us now from Cardiff. Ken Clarke, thanks very much for being with us.

KENNETH CLARKE: It's a pleasure.

JON SOPEL: In a speech this week, your leader David Cameron said, 'the richest in society must bear their fair share of the burden' What did he mean by that?

KENNETH CLARKE: He meant we wouldn't be able to reverse what the governments announced, this increase to 45% in the rate of income tax on people who earn more than a hundred and fifty thousand pounds a year. There's absolutely no doubt that you know, this is an irritating consequence if you like, of the mess that Gordon Brown has made of the public finances, but we couldn't possibly expect people on ordinary incomes to understand why you were easing that at a time when we know the next government, like Margaret Thatcher's government in 1979, is going to face a tremendous mess.

It's going to inherit an enormous level of public debt of a kind we've never previously seen and we're going to have to take some tough and difficult decisions and we've got to fair about it. We've got to make sure that the rich pay their share along side with what other people can afford.

We're hoping to avoid tax increases for the generality, but we've got to take a much, much tougher view of public finances than Gordon Brown ever did.

JON SOPEL: So what do you say to the Norman Tebbits the Boris Johnsons of this world? The mayor says you can't solve the problems of the economy by jacking up tax rates.

KENNETH CLARKE: Well it's a symbolic tax increase. It isn't going to raise much money actually… (interjection)

JON SOPEL: Well then why do it.

KENNETH CLARKE: (overlaps)… it's not going to turn off entrepreneurship, I mean Boris is wrong. I normally get on, well I get on, well I do get on very well with Boris personally and I often agree with him, but on this he's just wrong.

It is something we would not have done and the government certainly wouldn't have done either, if it hadn't been for the mess that there has been created. (interjection) You've only got to look at this pile of debt, and we do have to settle the debt. This isn't, you know, I don't want to sound like an accountant.

If we don't do something about the staggering amount of debt we're going to face when we get in, the result is going to be that interest rates are going to be higher. We're all going to have to pay taxation, to pay the interest on the government debt.


KENNETH CLARKE: (overlaps)… going to slow down the recovery a great deal. So we're making clear, we're a government ready for office. As you say, I've been in office before. We took over a terrible mess when… (overlaps - interjection)

JON SOPEL: Sorry, let me just interrupt you a moment. You're making Boris Johnson's point in a sense, that you're saying, actually, it's not going to raise that much money. If it's not going to raise that much money, why do it?

KENNETH CLARKE: Well what it raises will help and if you are thinking of postponing things the government have announced, I'd prefer to go for the increase in National Insurance which they slipped out in the pre-budget report. They're going to put up the National Insurance rates that employers have to pay.

They're going to put up the National Insurance rates that employees are going to have to pay and course they say, we're not going to do it before 2011, because they've put it over the hill beyond the election.

Now if you're facing, as we will be, huge problems of unemployment, for the Government to leave in the pipeline as it were, that increase in the cost of employing anybody as well as an increase in the tax, which is what National Insurance rates are, for everybody who you take on, you're going to slow down the recovery again. Now that, that bothers me far more than the 45p with great respect, on a hundred and fifty thousand pounds a year.

JON SOPEL: Fine. Let me come to a specific then and just bearing in mind that phrase from David Cameron, 'the richest in society must bear their fair share of the burden'.

Why are you raising the inheritance tax threshold to a million pounds per person, two million for a couple, when that is only going to help the very richest with the largest estates.?

KENNETH CLARKE: Well I think that is an aspiration we've retained, because inheritance tax hasn't moved in line with inflation. But I don't think we're going around any longer saying, this is something we're going to do the moment we take power.

We, of course, what we can't do, what George Osborne can't do is spell out a budget now. Alistair Darling keeps postponing his budget. He's talking about not having a public spending review because he doesn't want to frighten the horses… (interjection) before the election.

When we get in, George will have to do a budget and as David Cameron said and George and I certainly totally agree, the first priority is what do we do about this mountain of debt… (interjection)

JON SOPEL: You've said something quite important there. You've said that essentially, inheritance tax is an aspiration; it's off the shelf. That's not going to happen in the first years of a Conservative government.

KENNETH CLARKE: We're going to have to consider when we get in, when we can afford to do that, is my opinion. And I don't think anybody is saying anything different to that. We think there is the case to be made, which we made very effectively, for making sure inheritance tax doesn't catch people who have been caught by house price increases.

The house price increases aren't so significant, so sooner or later, I'd hope we would do that. But I really don't think we're any longer saying that we, the Labour Party is going to leave us in a position to make that the highest priority when we get in.

The highest priority is tackling the debt, doing our best to avoid any more tax increases because what we've got to do is tackle unemployment, create the circumstances in which business can create jobs, begin to move back… slow, to a level of growth which is acceptable again.

JON SOPEL: Sure. And you talk about the tough choices that you're going to have to make when you're in government and you've just made clear that inheritance tax is one of those which is going to move down the agenda.

People looking at the budgets that you're saying, will absolutely remain protected, they'll look at international development and say, really, are you saying that international development is more important than education, schools and our nation's defences.

KENNETH CLARKE: Well we live in a global economy and the impact on the very poorest in the world, on this dreadful crash, which has been caused by bankers' folly and the failure of governments like the British and American governments to regulate the bankers' folly, is actually hitting people in the poorest parts of the world, more severely than it's hitting us.

That's why, in a global, responsible economy, you have to make your contribution to easing the problems in the emerging world and they are the emerging economies.

They will be important again. Health we have exempted. Course, you're not going to make great cuts in public services, we've got to combine sensible economics with social responsibility and actually, in creating jobs, further education, skills training, re-skilling the unemployed, they're going to be key things in making the economy work again. But it's no good pretending, as the government do, that the current recession doesn't change their spending plans, that some how, they' don't have to adjust the ordinary spending.

And makes bizarre attack upon us, every time we talk about restraining public spending, as though we're being unpatriotic. Gordon is still out there saying, all you have got to do is borrow and spend and he won't accept any questioning of his spending plans, in the middle of the most appalling recession, when it's obvious that fiscal policies have been shot to blazes and what his Chancellor, Alistair should be doing, is producing a credible plan for getting back to sustainable public finances, when he produces his next budget.

JON SOPEL: What do you want to come out of the G20 summit because it's unclear, I mean I'm sure you're saying, well, I want agreement from all the twenty nations that are going to be there, but it's unclear what the Conservatives want in terms of detail.

KENNETH CLARKE: I think it's very important that we get global agreement and… one day it will be difficult. I think we should have global agreement particularly on no protectionism.

We should have global agreement on co-operation between regulators, to make sure the great multi-national banks are not able to ruin the system again and there should be agreement that we have fiscal stimulus on the part of those countries that can afford it, the surplus countries like Germany.

Now Gordon happens to be hosting this one. It's our turn to have the day in London. I'm not very impressed by Gordon wandering around pretending that he is a significant leader in solving these things.

He's the last survivor of the people who made the problem and to cover himself, he's trying to suggest that every country in the world... (interjection)… going for more borrowing, one that can't afford it is the United Kingdom and the other countries know that.

JON SOPEL: Okay. I just wanted to ask you a question about Leadership in Europe. William Hague has been to Brussels this week, confirmed that you are withdrawing from the main centre right grouping there. Isn't that head banging Euroscepticism?

KENNETH CLARKE: Well I wouldn't describe it as that… (interjection)

JON SOPEL: Oh yes you did actually. Sorry. Just when you came on the Politics Show three years ago, you said exactly that. You said that is head banging Euroscepticism.

KENNETH CLARKE: Possibly but - when I took office I made it quite clear that I had not had any Paulineconversions. You can find lots of quotes from me where I disagree with some aspects of our European policy.

The policy is settled, the policy in the EPP were settled when I was on the back benches and I agreed with David that - so I would not pretend to agree with all of our European policies but that it was hopeless to try to get them changed, indeed I wouldn't try to get them changed and the ones in the pipeline will work their way through.

There are no differences in principle between David and myself on things like European energy policy, environmental policy (interjection)… relations with Russia.


JON SOPEL: Just in a word Ken Clarke, does that mean you've joined the head bangers?

KENNETH CLARKE: No it means that I, the policies that were clearly settled when I joined in, like any sensible person, I accepted they were settled and I joined because David and I were extremely anxious to make progress on the much bigger economic problems that are overwhelming politics at the moment.

JON SOPEL: Ken Clarke, very grateful to have you. Good to speak to you, thanks very much indeed.

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