Page last updated at 18:38 GMT, Sunday, 22 March 2009

Tory tax cut 'not high priority'

Ken Clarke: "The highest priority is tackling debt"

Cutting inheritance tax would not be a high priority for an incoming Tory government, Ken Clarke has said.

The shadow business secretary told the BBC its main economic goals would be to cut public debt and restore growth.

The Tories' pledge to take millions of families out of inheritance tax in September 2007 was seen as a key moment in reviving their political fortunes.

Later, a Conservative spokesman said the party was still committed to its manifesto pledge to cut the tax.

Labour had said the more Conservative economic policies came under scrutiny "the more they fall apart".

'Tremendous mess'

Recent indications that the Tories will not reverse Labour's planned tax rises for the rich have already caused internal ructions.

Increasing income tax for top-earners to 45% from 2011 would be "difficult to avoid", shadow chancellor George Osborne has said - a stance backed up by Mr Clarke and foreign secretary William Hague.

But the Conservative Mayor of London Boris Johnson has said the move would stifle British enterprise, a view Mr Clarke said was "just wrong".

In recent weeks, senior Conservatives have stressed the party will face extremely tough choices if they win the next election given the state of the public finances.

The Conservatives insist cutting the overall burden of tax for families remains a long-term objective and have pledged to freeze council tax bills for two years among other proposals.

But they have declined to rule out tax rises after the next election.

We have been calling on the Tories for months to scrap this unfair giveaway
Angela Eagle, Treasury minister

Mr Clarke told the BBC's Politics Show the priority was to stabilise the public finances and to do so in a way which hopefully did not necessitate tax rises for the majority of people.

Tough choices would be required because of the "tremendous mess" the Tories would inherit if elected, he stressed, with debt levels "of a kind never previously seen".

On inheritance tax, he said raising current thresholds was an "aspiration" which the party retained and hoped to get around to "sooner or later".

George Osborne on raising the inheritance tax threshold at the 2007 party conference

At the 2007 party conference - at a time when a general election was considered imminent - Mr Osborne said the Tories would raise the threshold for inheritance tax from £300,000 to £1m - potentially taking nine million families out of the tax.

But Mr Clarke stressed: "I don't think we are going around any longer saying this is something we are going to do the moment we take power.

"We will have to consider when we can afford to do that. I don't think anyone is saying any different to that"

The BBC's political correspondent Carole Walker said the inheritance tax pledge seemed like a firm commitment and any suggestion it was now being downplayed would be highly significant.

'Disadvantages'

Labour said David Cameron must say whether he agreed with Mr Clarke's assessment.

"We have been calling on the Tories for months to scrap this unfair giveaway to the wealthiest few thousand estates," said Treasury minister Angela Eagle.

"What is clear is that the more Conservative economic policies come under scrutiny the more they fall apart."

Earlier, Mr Hague told the BBC's Andrew Marr show that reversing the 45% tax rate move for people earning more than £150,000 a year would not be a priority.

Boris Johnson
Mr Johnson said the tax rise sends out the wrong signals to entrepreneurs

Mr Hague acknowledged there were "disadvantages" in raising taxes and that many people believed a higher tax burden was a disincentive to enterprise.

But he said: "We are going to have to get a grip of this country's debt. We have a government that is planning to double the national debt in the next five years.

"Everyone out there in the streets know we can't carry on like that."

"We are going to be honest with people. There are going to be some tough and difficult choices."

'Clobbering' rich

Later on Sunday, a Conservative Party spokesman said: "People should be clear that the promise we made on inheritance tax is a promise we will keep. It will be in the manifesto.

"But for years George Osborne has said he will not write budgets - including the 2010 one - in advance.

"We are only able to help people who have saved to pass on something on to their children because we have identified those who will pay for it - non-domiciles."

David Cameron said recently the rich would have to pay their "fair share" to rescue the economy.

This stance has angered, among others, former Cabinet minister Lord Tebbit and London Mayor Boris Johnson who warned that "clobbering the rich" would be bad for business.

Mr Johnson said it would send out the wrong signal and "deter enterprise".

But Mr Clarke said his Tory colleague was "just wrong" on this and described the planned 45% tax band as largely "symbolic".

"It is not going to raise much money. It is not going to turn off entrepreneurship," he added.



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