Lord Forsyth joins the argument against increasing capital gains tax

After an intervention yesterday from John Redwood on the subject, today another former Cabinet Minister, Lord Forsyth adds to the pressure on the Government against increasing capital gains tax. (On Monday in the Daily Mail he warned against clobbering the middle classes with tax).

Writing for the Telegraph, he warns:

The problem we have, then, is not that capital gains tax is too low, but that the marginal rate of income tax is too high. The independent Institute of Fiscal Studies, the Centre for Policy Studies, the Adam Smith Institute and a chorus of others have warned that the increase to 50 per cent is unlikely to produce additional revenue.

The truth is we will only be able to repay our debts by creating wealth, by getting Britain working again and by selling goods and services in a competitive market. We cannot do that by hobbling businesses and entrepreneurs with a higher tax burden and punishing people who have done the right thing in saving and investing for the future.

If David Cameron is worried that the wide differential between capital gains tax and income tax is causing tax leakage, he should tell his Chancellor to have the courage of his convictions and cut the top rate to 40 per cent. The experience of the 1980s and of countless countries around the world suggests he will raise more revenue this way and that more of it will come from the wealthiest people.

Read the whole piece here.

Lord Forsyth has long been an articulate defender of free markets and freedom and I trust we will hear him continuing to make those cases in the convincing way that he does.

Jonathan Isaby