Redwood fights on over capital gains
Conservative malcontent John Redwood has offered a “compromise” arrangement in his bid to talk George Osborne out of increasing capital gains tax (CGT) rates in next week’s Budget.
The chancellor has agreed with the Tories’ coalition partners that CGT will have to go up to help pay for the Liberal Democrat-favoured increase in the income tax personal allowance.
Senior Tories like Mr Redwood and Mr Cameron’s one-time leadership rival David Davis have reacted with horror to the proposed move and launched an energetic campaign against it.
Speaking at the Policy Exchange thinktank, Mr Redwood said the Lib Dems were proposing an “equation of misery” which would see income tax allowances compensated by tax rises elsewhere.
“I’m trying to advise a coalition government where the minor party strongly believes in higher rates of CGT and the majority party probably doesn’t,” he explained.
He has proposed a taper which would see the amount of CGT payable decrease the longer the asset in question had been held.
“Surely we need to send a message to those prepared to take the action to forego consumption to save for a rainy day or save for a difficult time in their families’ lkives – we should say well done, we will not be too penal in our taxation of it,” Mr Redwood added.
Mr Redwood has refused to characterise himself as a rebel against the government, despite writing an open letter to Treasury minister David Gauke calling on him to shift the present policy.
He hopes to win a “compromise” with the Lib Dems by finding an area of “unity” – that both parties want to see the revenue from CGT maximised.
Mr Redwood believes higher CGT rates do not necessarily result in the most money entering the Treasury’s coffers.
He said evidence from both the US and the UK suggested that revenue is maximised when the CGT rate is at its lowest.
