Mr Duncan Smith acknowledges CGT concerns

Today a government Minister said the government has not yet formulated a CGT proposal – as I have been saying on this site. He also said they were conscious of the needs of entrepreneurs making business investments and savers needing investments for retirement. That’s a little reassuring. The taper idea I have put to them would deal with these issues. It was also important to read that if they are going to tax short term gains as income it will be at 40%, not at the temporary 50% rate.

In 10 days I have received 1163 emails, mainly about CGT. There are strong feelings about this in the country, as practically all of those were in support.

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12 Comments

  1. mark wild
    Posted May 30, 2010 at 4:56 pm | Permalink

    Reading the CGT debate its like fools arguing over the deckchars on the Titanic as the ship sinks, I believe in the NWO globalist agenda, I have lost all faith in the political elite to work for the people, However just incase I am wrong, Should the powers that be look at the rotten foundations of the sinking ship? The rotten foundations are the offshoring of industry to Asia while importing immigrants from all over the world and living as though this trend is not a problem,

    If actions are taken to reverse this trend and has results then I see hope, Failure will lead to a full blown bankruptcy of the UK PLC the likes of now with the default of state pensions age of retirement raising so high no one will ever live to receive it, The NHS will go after the state pension allong with everyones hard earned assets.

    The EEU is so distructive I cant find words but just an example a directive giving woman a year off work with full pay for a year on childbirth no wonder companies are offshoring,

    I understand I am off topic but thats the problem the topics wrong, I hope this letter put the cause of the UKs problems front and center.

    Regards Mark Wild

  2. Cat Fancier
    Posted May 30, 2010 at 5:51 pm | Permalink

    The high inflation we are beginning to experience and may go on to experience to a greater degree due to ultra-loose monetary policy and a depreciated exchange rate, already creates a great enough incentive to favour current consumption over future consumption or long term investment. The last thing (maybe that's too strong – at least one of the last things) we need are greater disincentives to invest from our volatile tax system. Those who favour higher CGT in the name of fairness should double check the difference between the meaning of "fair" and "equal", they may find that they prefer fair to equal, but have mistakenly been proposing equal over fair.

  3. Martin Bennett
    Posted May 30, 2010 at 6:15 pm | Permalink

    Dear John, Having read your daily articles for the first time,I concur with everything you say,and it makes me realised,OH how I miss a right of centre party. I feel that the coalition government,is trying to appease both parties, but it will not work,you only have to look at the CGT fiasco,to realise that they are not good bedfellows.
    The only reason I purchased a modest second home was to top up my pitiful pension,which thanks to GB, never realised anything like I was expecting,but if I had a pension on a parity with politicians,there would have been no reason to purchase a second home.
    If these morons touch my pension funds,just as I am reaching retirement age,they do so at their peril.
    Keep up the great work john,and I still say Digby Jones should run this country.

    Regards
    Martin Bennett

  4. Brian Tomkinson
    Posted May 30, 2010 at 9:09 pm | Permalink

    I should be interested to hear your reaction to this article about proposals to reduce tax relief on pension contributions in today's Sunday Times by Kathryn Cooper (see link below). If Kathryn is correct this is another time bomb ticking away which will not only kill off what is left of final salary pensions but drive away those people we need to be encouraging. Remember what Brown did to pensions and please don't finish off his despicable work.
    http://www.timesonline.co.uk/tol/money/pensions/a

  5. James
    Posted May 30, 2010 at 11:43 pm | Permalink

    The DT has struck a blow against you John. In hounding out Laws they've taken out the one Lib Dem who wholeheartedly agrees with you (he wrote that your proposals were ingenious and praised them generally, certainly more than anyone else in the cabinet has managed to say). If the DT had a strategy in what they did this weekend, they really didn't think it through

  6. FatBigot
    Posted May 31, 2010 at 7:12 am | Permalink

    I find the current events around CGT to be an example of politicians doing exactly what they should do.

    Different proposals are being put forward and they are being debated openly with a view to finding the best possible position for current circumstances. Not everyone will agree with the outcome but a decision will have to be taken by the government and then submitted to the House of Commons.

    We have become accustomed over the last decade to policy being dictated following a short meeting of a select few on the Prime Ministerial soft furnishings and then whipped through the Commons without sufficient time for careful consideration. The result has been appallingly bad law over and again.

    Making law, whether in the realm of economic policy or any other, is a serious business that requires careful thought and detailed debate. Putting forward a proposal that is rejected or amended is not a failure, it is part of the best process yet devised for getting things as right as we can.

  7. Mark
    Posted May 31, 2010 at 9:36 am | Permalink

    I hope the problems with posting to the site have been solved. Posting has been producing "not found" errors, and broken links.

  8. Daryl_S_London
    Posted May 31, 2010 at 3:41 pm | Permalink

    Yet another of Brown's messes that need to be cleared up. Never has a single politician been so misguided nor caused so much damage.

    Lawson's reform of CGT was perfectly equitable. Gains were taxed as income but the asset would attract indexation relief. It was Brown that changed this and started much of the current problems.

    Many us of, due to another of Brown's misguided tinkering have been deprived of our final salary pensions and by buying a rental property out of our earned income have hoped to supplement a meagre pension in retirement.

    To suddenly tax the growth of an asset that may have been held over 20 or 30 years at 40% would be a complete betrayal of trust and would devastate many, like me, who are not by any means rich but are relying on their properties to repay mortgages and provide a retirement lump sum. It’s little better than daylight robbery.

    I completely support your idea of reviving taper relief and rewarding people who have been responsible and tried to plan to look after themselves in their old age.

  9. Stephen Berry
    Posted May 31, 2010 at 4:51 pm | Permalink

    Mr Redwood,

    I have long been in agreement with most of your political views.
    However, I believe that you are mistaken in your stance on CGT.

    As much as I would like to see Government spending slashed and taxes reduced, the parlous state of the economy following Labour’s ‘tax and squander’ years means that taxation must increase in the short term.

    Direct taxes can be raised on the income a man earns through his labour, or on investment returns from the deployment of his capital.

    At present the tax burden on labour is over twice that on many types of investment.

    For instance, with a standard personal allowance, and allowing for company and personal NI, the tax on pay of £30,000 is about £9,275. Contract this with the tax of £4,461 on £30,000 bank interest. The tax on a £30,000 capital gain would be £3,582.

    I believe this is unfair, particularly to those who do not have wealthy parents. I am aware of the argument that investment returns arise because people save from their earned income, but I consider this argument both spurious and irrelevant.

    I would respectfully ask you to reflect on this. To my mind it is National Insurance that is the most damaging of the taxes.

  10. nonny mouse
    Posted June 1, 2010 at 7:09 pm | Permalink

    Surely, what you are proposing is basically going back to something like we had in 2007. CGT bands at similar levels to income tax with tapering to take the sting out of them. I'm not sure I'd quite go as far as calling that 'ingenious', but 'common sense' might work 8)

    The key is that any savings go towards the income tax cuts, not just swallowed up by defecit reduction. We also need to make sure the Conservatives get a fair share of the credit for actually implementing the income tax cuts and finding a way of making them work, even though the idea came from the Lib Dems.

    As far as I can tell CGT brings in very little revenue anyway. I cant find recent figures, but it seems to be in the 2-4 billion range for all CGT.

    Read my thoughts here: http://mrnonnymouse.blogspot.com/2010/06/truth-ab

  11. grahams
    Posted June 4, 2010 at 3:41 pm | Permalink

    I wonder if the proposed changes in CGT will lead to a rash of families being made homeless. Unless the new tax is brought in from Budget Day, rather than for 2011-12, it will pay many landlords to evict tenants on non-fixed leases, or coming to the end of fixed terms, so as to repaint and sell the houses before the new regime starts. They can always buy other properties at today's market prices later. This occurred to me because a friend and her daughter have just been issued with the statutory two months notice to quit, out of the blue and for no obvious reason. Impossible to say if tax is this particular small landlord's motivation, despite the timing, but it is easy to predict that thousands of other families might be served with notices to quit over the coming six months to beat the tax. For their sakes, one must hope that long-term gains are not taxed penally or, if that fails, that the new tax is brought in "from tonight".

  12. Paul
    Posted June 5, 2010 at 11:54 am | Permalink

    If these changes come in from the next tax year, I will take my gains and then only invest in companies I can hold in my ISA.

    So these changes would lead to a loss in revenue for the tax man going forward.

    Mr Cameron needs to remember that he may need my vote sometime soon, so best not to alienate core conservative voters to keep your Liberal partners happy.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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