George Osborne believes that there is a "good chance" that Labour's CGT changes might be abandoned

Labour did so much to woo business but the recent proposed changes to Capital Gains Tax have united business organisations in opposition.  George Osborne met leading members of a campaign to see the CGT reforms reversed and has just said that "there is a good chance that Alistair Darling will be forced to climb down over his plans to remove taper relief on CGT, which impose an 80% tax rise on long-term investors."

The Shadow Chancellor was speaking as he published interim results from an independent commission on enterprise commissioned by the Conservative Party.  The European School of Management report uncovered the following worrying trends:

• "The proportion of businesses that achieved an annual turnover above £1 million five years after their creation has nearly halved from 29% in 1998 to 16% in 2006.
• According to an Entrepreneurs Organisation (EO) survey, if taper relief is scrapped then 33.3% of respondents would emigrate now and 33% would consider it seriously in the future.
• The proportion of UK companies that have turnover above £7m, five years after creation is less than half the EU average."

Download a PDF of the full ESM report.

Mr Osborne's campaign against CGT coincides with a ComRes survey that shows he is winning the confidence of business leaders.  ComRes interviewed 255 "London business leaders" and found that 49% were fairly or very confident in George Osborne.  Only 15% said the same of Alistair Darling and only 30% said the same of Gordon Brown.  Click on the image on the right to see the extent of business leaders' lack of confidence in the Chancellor's ability to understand business and to support enterprise.

Comments

[Andrew Lilico]

As I said on the day, the CGT changes will be those that are most long-lasting - Darling's IHT-change-memory will have disappeared before Christmas.

This is almost very good politics - it's certainly working to damage Darling. But I'm just a tad hazy on what our own policy is. Are we saying that we think Gordon Brown's taper relief scheme was good? Presumably not, since we have just sponsored a report saying that Brown's measures to promote an enterprise culture have failed. So do we think that the taper relief should indeed be abolished but that the problem with Darling's scheme is that 18% is too high? Or is our line that we don't need a line of our own: it's Darling's mess, we wouldn't have started from here, and we're happy to point out the drawbacks of all alternatives even at the cost of a bit of inconsistency - Labour was very happy to be praised for its scheme in the past and the fact that it proves to be a mess needs to be exposed?

If someone asks: So what would you do? what am I to reply?

[Andrew Lilico]

I guess one possible reply to my own earlier question would be for us to say that we would seek, over time, to reduce taxes on entrepreneurship and to encourage businesses to locate into Britain, and that we would raise green taxes to compensate. Is that the way to go?

[CCHQ Spy]

I hope this growing support for George amongst the business community translates to the wider public.

[matthew]

these selected samples of 'business leaders' are hardly representative though, are they

[PW]

They've tried to deal with the private equity carried interest issue by cutting off taper relief. Clearly a horribly simplistic solution with a big impact on small businesses in particular.

Taper relief whilst a good 10% headline rate, is fiendishly complicated. I think our policy would be to support a 10% rate, but simplify it.

Qith respect to carried interest, the key is not to allow it to be treated as capital gains. It isn't capital gains. It is not (for the most part) risk capital. It is a performance fee. Just like a bonus. It should be treated as income. The problem is, if we treat it as income, all the money goes offshore and we can't tax anything.

If you look on the British Venture Capital Association website, you will find various Memoranda of Understandings, in place to offer certainty as to how taper relief, amongst other things, would apply. I think our policy should be to change or create a new memorandum of understanding. The quote re fat cat city bosses paying less tax than their cleaners is true. Its not clever tax avoidance - its government endorsed! Our policy should be to change it but not to the extent that all these wealth creators bugger off offshore.

[PW]

I should add that the government did not really know what they were doing when they signed up to these memorandums of association. The tories should speak to some tax lawyers/the BVCA if they are not already doing so.

[Priyen]

A poll of 250 people has an error margin of about +/- 7%.

You'll forgive me if I don't take it in any way seriously...

[601]

"George Osborne, the shadow chancellor, hosted a meeting yesterday of leading London-based entrepreneurs behind the Downing Street petition that has now attracted more than 11,000 signatures"

He should tour the country not just London.

[Andrew Lilico]

Err...So, Priyen, your claim is that confidence in Osborne is 42-56%, whilst that in Darling is only 8-22%. And the reason you don't think that huge lead, even on your own worst case scenario is...?

[Comstock]

C'mon Darling, stick to your guns. You are a Labour chancellor- act like one.

I must confess part of me doesn't want the fat cats of the big business community to 'have confidence in' Darling- it wants them to be quaking in absolute *terror* every time he opens his mouth.

[John Moss]

We should end the separate taxation of capital gains. All gains from any asset should be carried across to revenue/income and taxed at the company or individual marginal rate.

We could then get rid of the annual CGT allowance and introduce a very simple system of taper relief, with the percentage of gain carried across declining by 20% pa, ideally down to zero, but if we stopped the taper at 40% for assets held for more than three years, this would then produce and effective rate of 16% for top rate individuals, 8% for lower rate payers, 11.2% for large businesses and 8.8% for small businesses.

(Actually, that's a misnomer, the lower rate of Corporation Tax doesn't apply to small businesses, it applies to businesses with profits below £300k, irrespctive of size).

If we could, we should then replace the split rate Corporation Tax and Income Tax systems with flat rates, but with a larger tax free allowance for individualas and introduce one for businesses. That produces a perfectly straight line progessive increase in effective tax rates and is so simple it would free up vast amounts of energy to do other, more profitable things.

[Adrian Peirson]

This is disturbing.
http://bfbwwiii.blogspot.com/2007/10/frankfurt-subversion.html
PS the reason the Socialists want to have an Elected Lords is toget rid of the
Bishops who have an automatic seat.

http://thejournal.parker-joseph.co.uk/blog/_archives/2007/10/3/3269034.html
http://thejournal.parker-joseph.co.uk/blog
http://www.brusselsjournal.com/node/865
http://video.google.com/videoplay?docid=3664960863576873594&hl=en-GB
http://thewestminsternews.co.uk/
http://www.eutruth.org.uk
The curse of Political Correctness
http://www.capc.co.uk/
http://www.ukip.org/ukip/index.php?option=com_content&task=view&id=186&Itemid=68
http://www.capc.co.uk/Petition%20Form.pdf
http://thejournal.parker-joseph.co.uk/blog/_archives/2007/10/3/3269034.html
5 Min read
http://www.brusselsjournal.com/node/865
http://britanniaradio.co.uk/?q=node/2