The Institute for Public Policy Research has called for reform of inheritance tax. The IPPR said a banding system similar to income tax, with rates from 22% to 50%, would be the easiest way to make the system fairer.

The Institute said the chancellor could raise £147m a year and yet still cut death duty for up to 90% of people.

According to the BBC, the government is studying the report from the think-tank and the admission that the report will be examined has prompted the Tories to suggest that tax rises are on the way.

The IPPR report recommended a tax cut for middle-class families, with extra tax raised from the wealthiest invested in "spreading wealth ownership" through the Child Trust Fund.

Researcher Dominic Maxwell said, “A fairer inheritance tax would see the very wealthy, who are comfortably over the threshold, pay more, whilst the vast majority of families that are currently taxed would pay less."

"As well as being fairer to those who inherit assets, this reform would also benefit those born with nothing, through a beefed-up Child Trust Fund."

“The past decade has seen a worrying rise in wealth inequality. Inheritance tax reform is only part of the response needed but it would certainly help to protect the principle that government can and should seek to moderate wider wealth inequalities."

The IPPR claimed that inequality of wealth was "about twice as great" as inequality of income, and that almost a third of total wealth in Britain was owned by two per cent of the population.

It argued that the easiest way to make inheritance tax fairer was to introduce banding. There would be a base rate of 22% and two higher bands of 40% and 50%.

Eighty-seven percent of estates would pay less, but the new system would still raise an extra £147 million on the basis of 2000/01 figures, the IPPR said.