Of all the people to derail a 2007 election a Tory politician who died some 200 years ago must be the most improbable. Yet if William Pitt the Younger had not introduced a “legacy, succession and estate duty” in 1796 there would be no votes today in promising to slash it. As all opinion studies indicate, it was the Conservative pledge to raise the threshold for paying inheritance tax to £1 million that compelled Gordon Brown to abandon a contest this November. Without it, he would probably have dissolved Parliament tomorrow and with confidence.

It is, instead, the opposite for the Prime Minister. His “humiliation” may be less of an embarrassment in the longer term than is predicted. The option of keeping an early poll in play was worth the risk even if the reward did not materialise. The public cares far less about these events than do the pundits. Besides which, he has the fortune of the surreal combination of Jonny Wilkinson’s foot, Lewis Hamilton’s tyres and the inquest of Diana, Princess of Wales, to crowd out the adverse headlines.

Nor are the polls as awkward as they might seem. The striking aspect of them is the consistency of Labour’s 38-39 per cent rating, the same standing that it has been since Mr Brown’s first weekend in office. The two surveys published yesterday putting the Conservatives ahead both had support for the Liberal Democrats at incredibly low levels.

The same YouGov poll for The Sunday Times that had a three-point Tory lead also had Mr Brown with higher personal approval than David Cameron. The ICM poll in marginal seats for the News of the World that showed a 44-38 per cent Conservative edge also revealed that when asked whether the Tories were ready to form an administration, the response was 37-52 per cent in the negative.

Worryingly, this means that at least 7 per cent of those canvassed were ready to back a party that they did not think was prepared for power. That’s democracy, I suppose.

The odds are that Labour’s advantage will be restored shortly. But that advantage will be maintained only if the Prime Minister and Alistair Darling, the Chancellor, neutralise the inheritance tax question.

In theory, it is bizarre that the tax should have such potency. Free-market enthusiasts should always prefer to reduce taxes on money that has been earned through enterprise rather than a windfall. Social democrats should be unhappy with any measure that entrenches the position of those who are already comparatively better off. It is not surprising that there is a public demand for a tax cut of some sort – as is reported today, disposable income as a proportion of all income is at its lowest for a decade. But one could win from the Conservative inheritance proposals immediately only if one slipped poison into mother’s coffee.

And the number of possible beneficiaries is tiny. About 25,000 people would have benefited last year from a £1 million threshold. In terms of floating voters living in crucial constituencies, perhaps 3,000 individuals at most would have been enriched by it.

This is, though, a case of logic, shmogic. Inheritance tax has a talismanic status massively out of proportion to the statistics.

It enjoys this for three reasons. The first is symbolic. It reinforces the notion that there is nowhere that you are safe from the taxman, even in a coffin. The second is emotive.

There is a sense in which Richard Dawkins and his fellow atheists are as committed to life after death as much as those who attend church every Sunday. There is a powerful psychological appeal to the idea that a little part of us carries on from beyond the grave through what we do with our last financial bequest, particularly if it is handed to the children. Finally, inheritance tax is not really about inheritance in its wider context at all. It is about the British and property.

Economists berate this fixation and the alleged “distortions” that it causes. I disagree with them. If this country were a boat it would sink seconds after launch because too many people would be crowded into its south eastern section. This part of England is the most densely populated area in Europe after the Netherlands. It is entirely rational that land and what is built upon it should be valued so highly. Rising property prices have led millions of people to conclude that they could be captured by inheritance taxation. They resent this bitterly.

Labour cannot allow the Conservatives a monopoly on reform here. The smart move would be to address the property issue directly. The Chancellor should announce that the existing thresholds and rates of the tax will remain in place but the principal family home would be exempt from consideration. It should be possible for the Treasury to make up the money lost by targeting the super-rich – one hopes in a more numerate manner than a poll tax levied on an unknown number of nondomiciles.

Some on the Centre Left will scream betrayal at this suggestion. The charge will be that such a tax break is too regressive in its impact. There is, in fact, a resolutely progressive argument that can be made in favour of it.

So few people are ultimately trapped by inheritance tax because so many are willing to do so much to avoid it. The current rules provide an artificial incentive for older people to sell large homes early and move into smaller ones. They thus compete with and invariably beat younger, poorer couples and families who are interested in acquiring the same houses.

The building industry has an inducement to build new homes aimed squarely at the retired providing shared facilities for them (the McCarthy and Stone model) and not at young workers. Unless inheritance tax is addressed, its perverse impact on the housing market will be ever stronger.

William Pitt the Elder once observed: “Don’t talk to me about a man being able to talk sense: everyone can talk sense. Can he talk nonsense?” It is time for ministers to appreciate that it would be not be nonsense for them to kill the death-tax issue.

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