A subsidy for your jag

So Jaguar Land Rover is getting its half-billion pound bung, as we had been softened up to expect. By not revealing any details, and claiming that it is part of JLR’s £4bn investment in electric cars in Britain, Grant Shapps, the secretary of state for self-promotion, can claim it’s a wonderful deal for Britain. He was quick to compare it with Margaret Thatcher’s deal with Nissan, which marked the turning point for the UK motor industry.

We’re at another one now. This government’s contempt for business has helped domestic car production to halve since the peak five years ago. The crowd-pleasing decision to ban the sale of new oil-driven cars, following the new post-Brexit (non)relationship with Europe, dealt a near-fatal blow to the industry. An indication of the shambles: it is less than a decade since JLR built a brand-new factory in the Midlands – to make diesel engines.

Since then, most manufacturers have cut back or closed, leaving Nissan and JLR as the only significant players. The political cost of letting JLR’s battery factory go to Spain scarcely bears thinking about, which explains why the Sunak administration has found £500m which it hasn’t got. We are unlikely to know the details (“commercial confidentiality”) but the most sensitive aspect is the promise of cut-price energy. Were JLR to pay the same price as other commercial enterprises, there would be no long-term future for its car-making here.

Thus another distortion is added to the crazy market for energy in the UK. Meanwhile, the lie that somehow offshore wind would be cheap is gradually being exposed. This week Vattenhall’s chief executive told the FT: “What we see today, it simply doesn’t make sense to continue the [Norfolk Boreas wind farm] project.” Alongside the rest of the renewables industry, she is lobbying for higher guaranteed prices, or there will be no new wind farms.

The chief executive of Stellantis, owner of Peugeot, Fiat and Citroen, reckons it costs 40 per cent more to make an electric car in Europe than it does in China. No country can sustain a significant manufacturing base if energy costs are materially higher than those of its competitors. State subsidies can postpone the day, but Britain, like the rest of western Europe, is hell-bent on making it expensive, while clinging to the delusion that windmills and sunshine will somehow offer cheap, reliable energy.

A tithe for Inheritance Tax

Of all the tax measures that can be described as a cynical sop to a political party’s core supporters, there is nothing to compare with Inheritance Tax. Even that last bung to the better-off, the removal of the Lifetime Allowance for pension pots, is insignificant by comparison. IHT is about the most painless tax imaginable, since you pay it only when you’re dead.

It’s also the tax that causes the most emotional response: I’ve worked hard, and paid off the mortgage, so why shouldn’t my heirs (or whoever) benefit from the value after I’m gone? This logic handily avoids confronting the reality that the value of your house has been swept up in the massive inflation in domestic property values, with no effort from the owner.

In fact, only about 4 per cent of estates are valuable enough to be taxable, thanks in part to past sops from previous Conservative administrations, fiddling with the rules about inheriting matrimonial homes.

Yet even by the low standards of the British tax code, the current system is broken. The labyrinth of rules, interlocking with trust law, requires professional guidance for all but the simplest estates. Getting to probate, the point at which the taxman agrees that the assets can be released, is becoming harder and taking longer every year.

IHT bears on the squeezed middle, with lawyers for those at the top constructing ingenious schemes to minimise or avoid any liability. It’s often said that the current system, with the seven-year rule before gifts escape an estate, is designed for those who trust their relatives less than they trust the taxman.

Complexity is, in the end, the enemy of fair taxation. The solution to untying the Gordian IHT knot is to impose a 10 per cent flat tax on every estate, large or small, subject only to a de minimis threshold for HMRC’s administrative convenience. There need be no offsets for payments to charities, spouses, dependants or clever avoidance schemes. The expense of setting up a trust would outweigh any saving.

At the historically resonant level of a tithe, every estate could afford to pay. It might even raise more money than the current dog’s-breakfast. It would certainly free the lawyers to do something more constructive.

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