Kemi Badenoch's pledge to exempt the family home from inheritance tax borrows from a proven Conservative playbook. George Osborne's 2007 promise of a £1m IHT threshold spooked Gordon Brown out of calling a snap election — even though the policy never survived contact with the post-crisis public finances. Badenoch is betting the same emotional charge around inheritance tax can shift political weather again. The numbers tell a straightforward story about who benefits. HMRC data shows fewer than 5% of estates paid any inheritance tax in 2023/24. Under current rules, a married couple can already pass on a property worth up to £1m to children or grandchildren entirely tax-free. Badenoch's plan goes far beyond this: the entire family home, regardless of value, plus an additional £1m in other assets, would be shielded. The more valuable the property, the larger the windfall. The fiscal cost is estimated at £6bn — roughly half of total IHT revenue, which is forecast to hit £9bn this year and £15bn by 2030-31. That money would flow overwhelmingly to the wealthiest estates in the most expensive housing markets. As Arun Advani of the University of Warwick's Centre for the Analysis of Taxation notes, 'where housing is expensive' mostly means 'where lots of people want to live' — areas with good jobs and high demand from younger, working families. The perverse incentive is the policy's most damaging feature. Exempting the family home from IHT creates a powerful reason for older homeowners to stay put in large, valuable properties rather than downsize. Selling and holding the proceeds in cash or investments would expose those assets to the 40% tax the home itself now escapes. The Conservatives promise to abolish stamp duty as a counterweight, but for high-value homes the IHT shelter dwarfs any stamp duty saving. The knock-on effects compound. Fewer family-sized homes reach the market in high-demand areas. Young families cannot upsize. Graduates and school leavers cannot move to where the jobs are. Advani goes further: there would even be an incentive for wealthier owners to upsize, moving into a larger property specifically to shelter more wealth from tax. The policy would actively reduce housing mobility in the places the economy most needs it. The political logic is real — IHT polls as deeply unpopular even among families who will never pay it, and Reeves's farm and family-business reforms sent tractors down Whitehall. But political salience is not economic justification. In a sluggish economy with stretched public resources, directing £6bn toward the already-wealthiest estates while reducing housing supply and labour mobility is redistribution running in precisely the wrong direction. Badenoch can make the political bet. What she cannot credibly claim is that this policy serves economic growth. Every mechanism in the proposal — the fiscal transfer, the lock-in effect, the housing supply freeze — moves value upward and mobility downward.
