Conservatives Push Labour to Cut Public Spending for Inheritance Tax Reduction

The Conservative Party is intensifying pressure on the Labour government to reduce public spending as a means to fund a significant cut to inheritance tax. Shadow Chancellor Andrew Griffith has labeled the inheritance tax (IHT) as an "immoral tax" that penalizes individuals for leaving assets to their children. The party plans to use an opposition day debate to push for exempting family homes, businesses, and farms from the death duty.

Conservative leader Kemi Badenoch announced the party's pledge at a recent conference, which also includes raising the threshold for death duties to £500,000 if the Tories gain power. Griffith stated that people "work hard all their lives to leave the best possible legacy for their children, and a key part of that is their family home." He added that the party has pledged to "scrap Inheritance Tax on the family home and reverse Labour's cruel family farm and family business taxes too."

To fund these proposed changes, the Conservatives have outlined plans to achieve "billions of pounds" in savings by reducing public expenditure, particularly by controlling the "ballooning welfare bill." Party officials suggest this could involve reintroducing the two-child benefit cap and cutting out-of-work welfare payments and universal credit. According to Conservative analysis, these measures would reduce the number of families paying inheritance tax by over half, potentially allowing couples to leave an additional £1 million tax-free.

The existing inheritance tax is levied on estates valued above £325,000, with the nil-rate band increasing to £500,000 for estates that include the main home passed to direct descendants. The proposed Conservative reforms are estimated to cost approximately £6 billion by the 2029-30 financial year.

The party also aims to reverse the Labour government's decision to levy inheritance tax on farmland, a move first announced by former Chancellor Rachel Reeves in the party's 2024 budget. However, the initial plans for taxing family farms were later modified following a campaign by farmers and pressure from some Labour MPs representing rural constituencies. Shadow Environment Secretary Victoria Atkins criticized Labour, stating, "Their family farm tax is an ideological attack on the people who have been producing our country's food for generations." She urged Labour MPs in rural areas to support the Conservative motion, warning that if Labour does not fully abolish the tax, the Conservatives would do so if returned to government.