Darling delays capital gains tax reform

Delay to reveal capital gains proposals in new year

Thursday, 13, Dec 2007 12:00

The chancellor has been accused of creating an environment of uncertainty after he refused to confirm whether the government would back down on a proposed flat-rate of capital gains tax (CGT).

Alistair Darling's attempts to simplify the CGT system with a flat 18 per cent rate of tax have been met with fierce opposition by business leaders, prompting speculation the Treasury would be forced to make some concessions.

Mr Darling originally said the government's final proposals would be published before Christmas but today told MPs the reforms will not be revealed until January.

This has prompted speculation the Treasury is undecided in the best way to present a potential U-turn on CGT reform.

The Conservatives claim the Treasury briefed business leaders earlier in the week to expect an announcement within days.

However, following a request by the Liberal Democrats, the chancellor told the Commons he was not in a position to publish the proposed changes until the new year.

Mr Darling told MPs "helpful discussions" had taken place with business representatives, who have been largely opposed to government proposals to abolish the ten per cent CGT rate on the grounds it could deter entrepreneurship.

The Conservatives claim it is an "open secret" the Treasury concessions are ready.

Shadow chancellor George Osborne called on his counterpart to "do the right thing" and announce the final proposals now, thereby ending the uncertainty felt by small businesses.

Mr Osborne speculated: "The only explanation for the incompetence in not making them public as promised is that Gordon Brown has blocked them at the last minute while he dithers about what to do."

The Liberal Democrats have also accused Mr Darling of creating confusion. Economic spokesman Vince Cable said it was "entirely unacceptable" hundreds of thousands of businesses are left in an "environment of uncertainty".

Mr Darling proposed the single 18 per cent tax rate in his pre-Budget report in October. Despite criticism from business, he told the Treasury select committee a single rate was "the right thing to do".

By the time of the Confederation of British Industry (CBI) conference in late November Mr Darling said he was listening to representatives concerns, prompting speculation of an impending U-turn.

The Liberal Democrats said the uncertainty could have been avoided if the government had not "bungled its original proposals".

Mr Cable said: "By failing to properly consult business in the first instance over these reforms, the chancellor showed total ineptitude. Alistair Darling's continued dithering is just making a bad situation worse."

The Conservatives say confirmation of a U-turn will be humiliating for the chancellor.

Mr Osborne said: "He is defending his first and only original tax proposal – when everyone knows in the new year he will announcing a U-turn forced on him by the business community and his political opponents."