Over the last decade the UK has been marooned with a high standard rate of capital gains tax, whilst many other countries have decided to be friendlier to savers and entrepreneurs by slashing CGT rates.
I welcome Mr Darlings decision to cut the wholly uncompetitive 40% UK rate to 18%, a rate closer to the norm amongst advanced nations. It is exactly what he should be doing.
Unfortunately Mr Darling could not resist a sideswipe against enterprise, with his wish to hike capital gains tax on investors in businesses by 80%. This has understandably caused a massive furore, and has lost the government much support in the business community. It has undermined the good work of his general CGT reform.
Today I am pleased to hear that Mr Darling intends to change his mind on gains up to ?750,000. It is a small step in the right direction. It is unusual in this government for a Minister to listen and to amend. He now needs to listen more, as his proposals are still damaging.
It is one of the ironies of Mr Darlings troubled times at the Treasury, that he should choose to assault the one tax change his predecessor Mr Brown had brought in which had won universal acclaim from business. The 10% CGT rate was compelling and competitive. It succeeded in attracting large amounts of new business to London, and underpinned a large pool of venture capital and private equity activity. Last year as this government and some in the media always do, it was time to slate people for their success and to cast envious eyes on their rewards. Against this backdrop the Chancellor foolishly saw a pot of gold he could tax. He did not seem to understand how footloose that money and skill is, and how much other centres in the world want it.
In todays difficult climate for enterprise the government should expect redoubled competitive attacks from other countries, who will want that accumulation of capital and that financial talent. Our competitors were thrilled when Darlings politics of envy started his move against private equity and against non doms. His partial climb down today is welcome, but not sufficient to ensure all the money and talent will stay here. In a world fighting recession fears, jealousy and government greed are dangerous bedfellows. They are the enemies of enterprise, and the progenitors of lower growth and less prosperity. The UK has a lead as a world financial centre, but New York is about to benefit from the next round of Bush tax ciuts, whilst Mumbai, Shanghai, Dubai and many others are all out to take whatever London carelessly fails to look after.
John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
3 Comments
And may you allow me to say something nice about Peter hain/
“It was instructive knowing you, – good bye Sir!”
Indeed, a great many people of my acquaintance, simple middle class professional people, not mega-earners by any means are casting envious glances at Dubai. They are asking themselves if they can do business based in Dubai not the UK and finding that technology makes this ever easier. They are asking whether ever-upward council tax or no property tax is preferable. They ask whether state-run, MRSA ridden hospitals, or clean private sector hospitals are better. They are asking whether it is better to be able to choose your children
Today Sunday 27 Jan on Sky News, Alan Duncan repeatedly referred to the electoral laws that Peter Hain and Wendy Alexander have fallen foul of as