Why you can't trust Labour

The chancellor seems to have no understanding of the reality of hard-working families up and down the country, if his budget crackdown on trusts is anything to go by.

Labour thinks trusts are used only by the very wealthy to avoid inheritance tax (IHT), but this is simply not the case.

Take my parents. They are certainly not in the super rich category, but IHT could be a problem for them – well, for my siblings and me – because the value of the family home will push their estate over the IHT threshold - £285,000 this year. It is not a swish pad in Chelsea, just a standard detached house in the distinctly unglamorous Midlands.

Like millions of ordinary families up and down Britain, my parents have worked hard, invested their money wisely and enjoyed a ten-year property boom. They have diligently paid tax on their income, their investments and their property, but their estate will be taxed again when they die at 40% above the threshold.

So they, and millions like them, were advised to take out a whole-of-life insurance policy to cover their IHT liability. They wrote the policy into trust, so that the proceeds themselves would not be subject to tax.

This practice, which has been standard advice for years, was turned on its head in Gordon Brown’s March budget. He sneaked in swingeing tax penalties on two types of trust that are commonly used to pass wealth down the generations free from IHT, while still retaining some control of the money.

The government initially claimed that only a tiny portion of Britain’s richest people would be affected by the crackdown, but it soon realised that millions of ordinary families with life policies in trust could be caught inadvertently and was forced into a hurried climb down.

However, there is still more than a little uncertainty hanging over the policies. Accountants are still decoding the details of the crackdown and finding circumstances in which insurance policies could be hit. Moreover, millions of people whose wills set up trusts when they die will be forced to rewrite them.

The cross-party Treasury Committee yesterday attacked the crackdown and called on the government to justify its claim that only 100,000 trusts would be hit. The Tories want to block the Finance Bill, which sets out the new measures – and they should also call for a complete overhaul of IHT system, which forces ordinary families to indulge in this kind of tax planning to preserve a little of their hard-earned cash for future generations.

Comments

["Flossie Foster"]

The intervention by the Chancellor regarding Trusts just about sums up this government! Would you "trust" any of them and buy a second-hand car from them? I would not. This interference with Trusts is just unthinkable and a step too far!

[Dirk Diggler]

This government is getting a bit Animal Farm-esque. They preach a damn good line but do not have the self discipline to practice it! Few have their integrity left, and many, including Pat Hewitt, choose not to listen to the masses but carry on spouting statistics that sound favourable over and over again. And how any female could find John Prescott a thing of desire is beyond the comprehension of an ape.

[James Gerrard]

The message from Gordon Brown is quite clear.
If you have any savings go out and spend the lot on enjoying yourself before he takes it off you.
You can then enjoy an old age free from worry in a retirement home paid for by the taxpayer. With everything you could possibly want supplied for free.
What a complete shambles the man is making of his much vaunted policy of "prudence".

[Edmund Naish]

Is anyone really surprised that a Labour government would do anything but tax and spend (waste)! They rely on the British publics apathy and reluctance to not rock the boat. Gordon Brown will only change things once he believes that public opinion is so far against him, that he has no other choice. Let us not forget that the ridiculous and unnecessary house price inflation was of their making.

[eddie reader]

The question that needs to be asked is why Gordon is doing this. Draw a line from Southampton, through Luton and off to Cambridge and north of that line most economic activity is down to government spending.
The driving idea behind Thatcherism and Reagonomics was that liberal economies produce more benefit for society than controlled economies.
Get money supply under control and inflation comes under control and then the cost of capital (interest rates) will fall. Combine that with labour market reforms (make labour cheaper than it might oherwise be) and then the cost of the two pillars of capatilism fall. Hey presto the economy will flourish produce wealth and jobs. Only it hasn't worked that way.
Both the US and the UK have become, largely, shopping malls. Although, in the US, this has been due to turning the money tap full on.
Three-quarters of UK GDP relies upon consumers. And consumers need incomes. The supposed pent up zeal of entrepreneurs that cheap capital and flexible labour was supposed to release just hasn't happened.
There was nothing wrong with Margaret's analysis, there's just a lack of UK entrepreneurship. That means the state has picked up the slack and has to continually find new ways to pluck the goose.
This situation will only get worse as private investment gets diverted into the pension black hole Gordon has created for UK PLC. Where will he strike next?

The problem in our country is that we are too complacent and accept the likes of Gordon Brown to trample over us. This man
has plundered the pension funds with his taxes to the point that a pension derived from a fund was hardly worth going without in all the years. He will be doing alright with his inflation proof pension.

One could write a catologue of taxes he has introduced since he became chancellor and there is no end to it. GOD forbid he is going to be our Prime Minister?

We should protest in the streets against
this government. The Poll Tax was soon
repealed after the protests. Ofcourse
it should be an non violent protest
introduced since he was chancellor