Tories Eye End to UK Inheritance Tax and Childcare Cliff Edge

UK Conservative leader Kemi Badenoch is using her party’s annual convention to call for the end of inheritance tax and an expansion of childcare support to higher earners.

In a series of media interviews to mark the beginning of the conference, the opposition leader set out a pitch to Britain’s aspirational middle-class voters to reconsider her party, against a backdrop where Nigel Farage’s Reform UK has made inroads and Labour, under new Prime Minister Andy Burnham, is enjoying a bounce in polls.

“My principle is that inheritance taxes are unfair,” Badenoch told The Times newspaper. “The richest don’t pay them. It is just the middle class,” she argued, describing the levies as “immoral.”

In the tax year through 2024, fewer than 5% of Britons paid the tax, which is levied at 40% on estates above £325,000 ($430,000). That raised £6.7 billion for the exchequer. According to the Office for Budget Responsibility, the tax will raise £8.4 billion in the year through 2025, rising to £14.7 billion through 2031.

Badenoch said she would not announce a plan to scrap inheritance tax without a way to fund it. “I’m not doing tax cuts until I can show that we’re being fiscally credible and fiscally responsible,” she said, while also signaling that was her direction of travel: “When we’re ready we’ll announce.”

In a separate interview with the BBC, Badenoch pledged to keep the so-called triple lock prjecting rises in state pensions which Burnham said he would alter to fund elder care. She also vowed to end she called the “absurd cliff edge” that sees parents lose out on state-provided childcare if they earn more than £100,000 a year.

The current system means that if one parent earns above that threshold, the family becomes ineligible for government-funded or tax-free childcare. Think tanks such as the Institute for Fiscal Studies have said the system creates perverse incentives for those nearing the level to eschew longer hours and promotions.

“What we want to see is that people who work harder don’t get punished for doing so,” Badenoch told the BBC. She said this would be the “first step” in Tory proposals to reform the tax system.

Ahead of the conference, the Tories also announced a plan to build 50,000 new prison places, which they said would cost £2 billion a year and be funded by cuts including to foreign aid spending.

The previous Conservative government had instituted a statutory requirement that the UK spends 0.7% of gross national income on overseas development, which the Labour government has slashed to nearer 0.3%.

Read more: Burnham’s Big Bet Has the UK’s Tories Sensing an Opportunity

Bloomberg reported Saturday that Burnham’s speech at Labour’s own conference last week, in which he laid out a long-term vision for Britain including reducing the rise in the state pension, reforming the electoral system and potentially taking the UK back into the European Union, had the Conservatives sensing an opportunity to capitalize.

Tory officials said they saw their opponent setting up a more traditional contest along left-wing and center-right lines, adding that Badenoch would go into the next election pledging to be the party of economic growth, business and sound money.

Harking back to the party’s Thatcher-era roots, Badenoch called herself “a classic old school conservative,” and branded her opposition “the common-sense party” in relation to plan to cut welfare.

Still, many Tories doubt they’ll be able to turn around their fortunes in one electoral cycle after a wipeout in the 2024 election. It would likely take longer than that for voters to forgive and forget the brief market-roiling Liz Truss premiership and their chaotic years in office, party officials said.