Ed Davey suggests cutting inheritance tax on family homes but fails when he insists Lib Dems would target ‘the rich’ to offset revenue

Sir Ed Davey suggested tonight that the Liberal Democrats would back inheritance tax cuts to protect family homes – by forcing the very rich to pay more.

The party leader said the current system was “unfair” to middle-class people who were “being beaten up” while the super-rich used “savvy accountants” to avoid payments.

He suggested reforming the system so that people whose main asset is their home pay less and those with “really very large inheritances” are forced to stop “tax planning”.

Fears have been raised that Labour Chancellor Rachel Reeves could use IHT to help plug a perceived hole in the Treasury’s coffers, including by taking it from pensions.

In an interview with the BBC at the Lib Dems’ annual conference in Brighton, Sir Ed said: “Many people’s homes in many parts of the country are quite valuable and they end up being burdened by inheritance tax.

“It’s unfair because if you look at the other side of the coin, people who inherit huge amounts of money often manage, through clever tax planning, to avoid paying inheritance tax. So I would like to see a reform that would make that more fair, frankly.”

Asked whether cracking down on the super-rich to make up for any shortfall would fail because they are so good at gaming the system, he added: “The fact is we have allowed clever accountants… to allow people to do a lot of tax planning and avoidance, and we have to stop that.”

“And if we did that, I think people who are really wealthy and people who have really large inheritances, they might pay more if we did it right, so that clever accountants can’t hide the money.”

However, Sir Ed defended the call for capital gains tax increases, adding: “Personal taxes have increased significantly under the Tories and they still have some Tory income tax increases that are still in the budget coming.

“These horrendous tax increases under the Tories and the cost of living mean you should no longer be defending this approach.

“And that’s why we looked at things like reversing the tax cuts that were given to the big banks, why we looked at capital gains tax, why we sought, as you know, during the general election, to ask the social media giants to pay more.

“These are the kinds of things where we can get money from those who can afford it (so that) those people who are being bullied by the Tories and who are suffering from the cost of living, don’t pay more.”

Sir Ed left his party conference in Brighton on Monday morning to visit volunteers in the Sussex countryside, where he helped them replace a gate near the village of Ditchling.

He also visited the interior of Oldland Mill near Hassocks and helped to ‘furl’ the restored structure, moving the sails manually into the wind.

Asked about Labour Chancellor Rachel Reeves’ first budget, due on October 30, Sir Ed said: “I think the NHS and care are absolutely essential, both to save our NHS and to get our economy going again.”