Chancellor Alistair Darling has announced a rise in the inheritance tax threshold for married couples to £600,000.

Delivering his first Pre-Budget Report, Mr Darling said the couples' allowance for inheritance tax would be doubled from the current £300,000 threshold to £600,000.

The threshold will increase to £700,000 by 2010, he added.

This would benefit many couples across the South Hams as average house prices in the area already exceed the £300,000 mark by nearly £20,000.

"From today, I can announce the combined tax-free allowance for their estates will not be the current £300,000 but up to £600,000," Mr Darling said.

"And I can do more. To ensure that people who have already lost their husband or wife will also benefit, I will backdate this indefinitely for every widow or widower.

"And in future years we will take both house prices and inflation into account when setting inheritance tax thresholds."

Alistair Darling: "From today, I can announce the combined tax-free allowance for their estates will not be the current £300,000 but up to £600,000."

Mr Darling added that his inheritance tax plan would mean that 97 per cent of estates in the UK would be exempt.

But Shadow Chancellor George Osborne described the move as a "desperate cynical stunt from a desperate and weak Prime Minister".

Mr Osborne said: "I don't know why he even bothered to turn up. He should have called that election and let us give the budget. Instead we had a pre-election budget without the election.

"Now a week after we put forward our plans the Prime Minister and the Chancellor are scrabbling around in a panic trying to think of something to say."

Mr Darling's announcement comes just a week after Mr Osborne proposed raising the inheritance tax threshold to £1m.

The Tories outlined their plans to pay for the inheritance tax cut with a £25,000 annual levy charged to business people who register overseas to escape paying tax.

But Mr Darling said this measure would raise just £650m - well below the £3.6bn the Conservatives claimed.

"Initial costings by the Treasury show that George Osborne's proposal would raise a maximum of £650m, leaving George Osborne at least £2.9bn short," Mr Darling said.

"So George Osborne cannot afford the promises he is making. He cannot afford to cut inheritance tax."

Political analysts believe Mr Osborne's ambitious inheritance tax proposal was the key driver behind the Tories’ dramatic recovery in the opinion polls.