Coalition avoids capital gains revolt but tensions remain

A COMPROMISE over higher capital gains tax has stopped a Tory rebellion in its tracks – but there is growing tension in the Liberal Democrat party over higher VAT.

The coalition government yesterday increased the top rate of capital gains tax from 18 per cent to 28 per cent, a much lower rate than the 40 per cent that was widely expected.

There were several high-profile campaigns against the hike – including one in this newspaper – and yesterday Tory MPs told City A.M. the government had done enough to quell dissent. “This was as good a result as we could have expected, and Osborne has clearly listened. We’ve got three quarters of what we were looking for,” said Tory MP Mark Field, who backed our campaign.

And John Redwood welcomed a lower 18 per cent rate for “savers with modest incomes” as well as a “substantial increase in the entrepreneurs allowance”, although he pointed out that an even lower rate would actually raise more revenue.

But at least one Lib Dem MP has threatened to vote against the Budget because of plans to hike VAT.

“Less than 50 days ago, I was seeking re-election in Colchester opposed to a raise in the level of VAT,” said Bob Russell. “So I am not at all happy.”