Then we get in to that marvellous argument about how to measure inflation.

A problem is that the cost of housing is an issue – I think we all probably agree on that. If you use CPI, you get to take into account all sorts of things, but the cost of housing is not included; take RPI and it is. It is one of the principle differences between the two measures of inflation.

So, would you use RPI or CPI as your measure? To be entirely fair, you could, I suppose, invent a whole new measure of inflation that looks at the sorts of things that people inherit – houses and land at one end, second hand cars, pictures and furniture at the other.

The problem with this part of the discussion is that we end up talking about mechanisms, rather than the principles. I happen to disagree with the original post and with many of the comments – my reasons are set out in the posts that I have made. It’s been fun, and I have learnt a lot about what others, whose views differ from mine have to say – but I think I shall leave this post alone from now on …

But I will be back to argue again!!!

But that absurd inflation of house prices is also responsible for their inheritance being vastly larger than it would otherwise have been. By your logic someone would be happy inheriting an asset worth £250k with no tax bill but upset about inheriting an asset worth £350k and getting a £10k tax bill.

One of the problems with IHT is that the threshhold level did not keep up with inflation and in particular with property price inflation.

Agreed that the threshold should have increased in line with general inflation but I don’t see why it should have increased in line with house price inflation.

That’s what I’m calling for. (And for more high-density housing).

Actually, Cabalamat’s #73 pretty much illustrates Evan Price’s wider point about valuations for IHT (and CGT purposes) – agricultural land is worth about £6k an acre, farmland with planning permission is (was?) worth about a million. What’s the value of something without planning permission, but very close to a site earmarked for expansion? It is possible to argue for any value between these two amounts, and it’s safe to say that HMRC and the taxpayer would take rather different positions.

Not completely. I do think the planning process needs to be reformed to vastly reduce the cost of housing, however.

I don’t think that we should simply abandon planning control and other protections – do you?

Land isn’t expensive. Land with planning permission to build houses on it is expensive. The cost of farmland is about £5,500 an acre and you can build a lot of houses on one acre of land.

Have a look at the law on IHT and business property relief- tell us what you think should change? Tell us how you think the reliefs should operate more efficiently and how you would make them less open to abuse.

The problem with all of this is that the law is complex – it is also a blunt instrument. People will always exploit the blunt instrument and suffer under it – it is not intrinsically a fair tool for promoting anything. Simplification will elminate some of the unfairness, but others will exploit the simplification. Diminishing returns arise from increasing the complexity as compliance costs rise and we target every smaller so-called ‘abuses’.

As to your looking at American prefab houses as an example of limiting the costs of building a house, the problem is not the cost of the house, but of the land – and to quote the proverbial sage, they ain’t making any more of it. But that is not an argument about IHT.

I don’t suppose you or anyone else has data to back this up?

For these reasons we already have business property relief from IHT. I assume that you’re not opposed to that.

I think there should be a degree IHT relief for businesses in circumstances where it would harm a going concern, yes. (And obviously any such provision should be worded to make it as simple as possible and not open to abuse).

The attack on Conservatives contained in this is typical of the double-speak of many who despise the Conservatives on principle.

I don’t despise the Tories on principle, I despise them because I lived through 18 years of a Tory government and their policies were crap. I despise Labour for the same reason.

It is an attempt to isolate ‘real’ Labour from the actions of the Labour Government and spread the blame.

A party should be judged by its actions in power, and policies in opposiiton, not by some mystical inner entity it is supposed to have.

No-one sensible thinks that only the rich should own a home

Yet despite that, the cost of buying a home is vastly greater than many can afford, and more importantly, than the amount if costs to make one. (I say make rather than build because handcrafting bespoke houses on-site as opposed to building them from pre-fabricated units is clearly outmoded and inefficient).

There’s a firm in America that makes cheap houses out of shipping containers for $8000. The average UK home is about the 2.5 times the floor area of this so on this basis ought to cost $20k which is about £14k.

Housing is not, intrinsically, very expensive. It is only expensive due to distortions of the market (particularly planning regulations) and other stupid policies. Houses, like most physical goods, can these days be mass-produced very cheaply.

But I don’t think the Labservatives care very much whether their policies work — they are more interested in whether they go down well with floating voters in marginal constituencies, and with rewarding people who’ve donated large sums of money to them.

But we do already. Rolls Royce makes one third of all jet engines used globally ….and you don´t get much more high value and high margin manufacturing than that.

That’s not my experience – and indeed, the Federation of Small Businesses will not agree with this either.

“If it’s as business of any size, then the tax could be settled by selling shares in it.”

Shares can only be sold if there is a market for them. The market for minority interests in small businesses is tiny to non-existent and the result is the price that would be achieved would be negligible. Add to this the complication of valuing shares in small businesses and calculating the discount to be applied to a minority shareholding and you end up with a proposal that just won’t work.

For these reasons we already have business property relief from IHT. I assume that you’re not opposed to that.

“This is because both Labour and Conservatives, prompted by nimbies, refused to let enough new houses be build to satisfy demand. I guess the Labservatives think only rich people should be able to buy a house.”

The bubble, largely created and fed by Gordon Brown’s policies on banking and inflation, was unsustainable and bound to burst. That it survived so long is testament to his constant tinkering with numerous calculations and statistics. The reality is that if you remove housing as a factor in the equation for calculating inflation and housing inflation is one of the principles drivers of inflation, then you will end up making debt too cheap – and that in turn will feed into the bubble.

The attack on Conservatives contained in this is typical of the double-speak of many who despise the Conservatives on principle. It is an attempt to isolate ‘real’ Labour from the actions of the Labour Government and spread the blame. The reality about house starts is that they did reduce for some of the Conservative years, and yes that may have been an error; but the real reduction in house starts was in the last 12 years.

No-one sensible thinks that only the rich should own a home – having said that, it is in the UK that the rental market is reduced and home owning is so much the norm. This is another area where reform is desperately needed. But this is an argument for another blog and another day.

Hmmm. I suspect that family businesses handed down the generations were more common 50 years ago than today. If it’s as business of any size, then the tax could be settled by selling shares in it. If it’s a small business such as a shop then if the revenue form the business doesn’t cover a mortgage on 30% of the value of the physical assets, it’s inefficient and should go anyway.

One of the problems with IHT is that the threshhold level did not keep up with inflation and in particular with property price inflation.

This is because both Labour and Conservatives, prompted by nimbies, refused to let enough new houses be build to satisfy demand. I guess the Labservatives think only rich people should be able to buy a house.

We desparately need to reform our taxation system to simplify it.

Agreed.

Yes. This has been another exciting round of “easy answers to stupid questions”.

So having hard working, thrifty parents who think about the future makes you a “jammy sod” ??
I would say for most peoplea modest tax free inheritance won’t even come close to all the freebies and subisdies that the offsping of feckless, workshy chavs will get for their entire lives, and that’s without factoring in the costs of the inevitable prison spells, social workers, probation officers, special needs teachers, police and the social costs of the car crash that will be their lives. They get this “expensive thing” called welfare for free ?”

Most people are paying so much of their income in tax to support these people that the only hope they will ever have of owning a home or getting their kids a decent education is if they get left a modest sum by their parents.

70s style politics of envy indeed

But “Hey, I’m all for ‘that’ – for values of ‘that’ I just pulled out of my arse as opposed to what ‘that’ is in the real world” is one of Worstall’s more irritating gambits.

No, scrub that, it’s his only gambit.

They shouldn’t. And they don’t have to.

It’s the jammy sods in the younger generation, who’re getting an expensive thing for free, who bear the impact of IHT. As they should.

41. Good comment on mixed messages. Brown has continually taxed thos save money even in private pensions ( attacked by F Field ) or medical/ care costs in old age.

Why should elderly and often infirm people, who have worked hard all their life; saved money; perhaps spent years fighting for this country, bought a house as a home – not a speculative investment, due to a massive speculation bubble go through vast amounts of worry because of inheritance tax?

Nope, no cop out there, no-sir-ee.