CCHQ Party Bulletin - 01/10/07

• We will abolish stamp duty for 9 in 10 first time buyers by raising the threshold for first time buyers to £250,000.

• We will raise the threshold for inheritance tax to £1 million, so that only millionaires pay inheritance tax. For 98 per cent of families, this will take the family home out of inheritance tax altogether.

• We will pay for it by asking those with untaxed offshore income to pay a flat rate charge to contribute to living in Britain.

• These changes are separate from our Family Fund from new green taxes which will be used to pay for lower taxes for families.

• The aspiration of owning your own home has become an increasingly distant dream. Thanks to high house prices and rapid increases in stamp duty, the bottom rungs of the housing ladder are broken. And once on the ladder, parents find it harder to help their children when they die because of inheritance tax, which now threatens four in ten households.

• Labour.s approach is to increase stealth taxes on home ownership, through stamp duty, inheritance tax and council tax rises, while their top-down approach to planning builds

• Gordon Brown.s stealthy decision not to increase inheritance tax thresholds in line with house price inflation has meant that revenue from inheritance tax has more than doubled under

Labour, rising from £1.6 billion in 1996-97 to £4.0 billion in 2007-08 (HM Treasury, Budget  2007, p.281 and Budget 1997)

• Conservatives would exempt first time buyers from stamp duty, for purchases of up to £250,000, saving 200,000 first time buyers a year an average of £2,000 each.

• Under Labour, over half of first time buyers pay stamp duty. Under the Conservatives it will be less than one in ten. Exempting first time buyers from Stamp Duty for purchases of up to

• The Conservative Party will abolish inheritance tax for everyone who dies leaving under £1 million. This will lift almost nine million people out of the inheritance tax net.

• Inheritance tax was originally intended to apply only to the wealthiest households in Britain. However, under Labour, four in ten homeowners have been drawn into the inheritance tax net (Scottish Widows press release, 6 April 2007).

• According to independent research by Scottish Widows, under our proposals today, instead of 37 per cent of households being caught in the inheritance tax net, only the top 2 per cent would be affected.

• Instead of average households in 177 local authorities being eligible for inheritance tax . it will now only affect average households living in Kensington and Chelsea, the most expensive local authority in the UK. (Based on average house prices over £210,000 and £910,000; in addition to average household wealth of £92,034 (Sources: Land Registry; CEBR)

• According to Government figures, raising the inheritance threshold to £1,000,000 will cost £3.1 billion in the tax year 2008-09 (Hansard, 23 Apr 2007, Column 987W).

• We will end the uncertainty over the tax status of non-domiciled residents, creating a flat rate Offshore Domicile Levy on those who are domiciled offshore for tax purposes.

• Labour has created uncertainty over the tax treatment of non-domiciled residents, by holding their tax status under constant review.

• The Levy will safeguard the attractiveness of the UK as a place for wealthy foreigners to live, as their tax status will be guaranteed. At the moment it has been under review by the Government for five years.

• A cautious estimate is that the Levy would be paid by 150,000 UK residents of foreign origin who are tax domiciled offshore. If it was set at £25,000 a cautious estimate is that it would raise £3.5 billion.

• Setting the Levy at around £25,000 strikes the right balance between ensuring everyone contributes their fair share towards our public services and maintaining the competitiveness of the UK as a location for high net worth individuals.

Airline Pollution Duty

• In our consultation we set out three options for recognising the contribution of air travel to climate change. We have rejected VAT on domestic flights and an air miles allowance.

• We will reform the failed Air Passenger Duty, which Gordon Brown uses as a stealth tax, to an Airline Pollution Duty, a per-flight tax on airlines to encourage fuller flights and more efficient planes. Our aim is to reduce the growth of carbon emissions from aircraft.

• Climate Change is one of the greatest challenges we face, yet the UK.s carbon emissions have risen since 1997 (DEFRA, Statistical Release, 31 January 2007). Aviation is the fastest growing source of UK carbon emissions, and even under the Government.s best case scenario will grow from 5.5 per cent of UK emissions today to 24 per cent by 2050. The cross-party

House of Commons Environmental Audit Committee said even this is a .substantial understatement. Environmental Audit Committee, Reducing Carbon Emissions from Transport, 2006).

• Gordon Brown has given green taxes a bad name by using them as additional stealth taxes. He doubled Air Passenger Duty this year . a fundamentally flawed tax that even the Government admits is a .blunt instrument. that was not .designed for environmental ends. (John Healey MP, Financial Secretary to the Treasury, Treasury Select Committee, Climate change and the Stern  review: implications for HM Treasury policy on tax, 2007). But Brown did not use the revenues to cut other taxes on families.

• The Government.s only solution to growing aviation emissions is to include aviation in the EU Emissions Trading Scheme. We support this, but it will not take effect until 2011 and even the European Commission admits that it will knock just 0.1 per cent off the projected growth in air travel (Aviation to Come under EUETS from 2011, ENDS Report 384, 2007). The cross-party House of Commons Environmental Audit Committee has said it has .severe doubts as to its

effectiveness under current proposals. (Environmental Audit Committee, The EU Emissions  Trading Scheme: Lessons for the Future, 2007).

• Our objective is to reduce the growth in aviation emissions, not to stop people flying.

• In March 2007 the Conservative Party launched a consultation on the environmental taxation of aviation. (Greener Skies: a Consultation on the Environmental Taxation of Aviation, Conservative Party, March 2007). The consultation raised three potential solutions and invited submissions on which one was best suited to reducing the contribution of aviation to climate change:

• Charging fuel duty and/or VAT on domestic flights;

• Replacing APD with a per-flight tax based more closely on actual emissions; and

• Introducing some form of allowance so that frequent flyers pay tax at a higher rate.

• Following the recommendation of the Quality of Life policy group and more than 180 third party submissions, we will replace the per-passenger Air Passenger Duty with a new flight tax on airlines. Because the rates and structure of a per-flight tax on airlines can be designed to match airlines. incentives with environmental outcomes, there is no need for any additional taxes such as VAT on domestic flights.

• The Airline Pollution Duty will help to achieve our objective of slowing the growth in aviation emissions by providing enhanced incentives for airlines to fill their planes. It will also provide more incentives for airlines to use newer and more efficient planes with lower emissions. For example British Airways have recently announced that they will purchase new Airbus 380 super jumbos and Boeing 787 Dreamliners that have lower emissions than existing planes.

• This reform has also been recommended by easyJet. They have called for a .simple flight based tax based on a combination of the aircraft type and the distance flown. This would ensure that the tax much better reflects actual emissions, and therefore climate change costs. It would also incentivise airlines and passengers to fly as environmentally efficiently as possible, by for example flying fuller and cleaner planes. (EasyJet, Greener Skies, p.9, 17 September 2007).

• More details on the design and operation of the proposed Airline Pollution Duty will be published before the next election. Because emissions from aviation are currently not taxed in a way that reflects their full environmental impact, any reform will raise additional revenues. Every penny of additional revenue will go into an independently