GEORGE Osborne last night said Britain was “once again open for business” as he pledged to draw a line under strained relations between captains of industry and the previous Labour government.
In his inaugural speech to employers’ group the CBI, the chancellor said his “guiding principle” would be to support a private sector recovery by reducing tax and red tape to make the UK more internationally competitive.
He slammed the record of his Labour predecessors, accusing them of “paying lip service” to enterprise while erecting a “sign that said ‘closed for business’”.
“Today, public spending has risen to almost 50 per cent of the economy. Over 5m people are out of work and on benefits. Record numbers are economically inactive. Even now, there are those who still argue that yet more increases in public spending are the answers to our problems,” Osborne told CBI members at their annual dinner in the Grosvenor House hotel near Hyde Park.
Osborne said he would bring the UK’s Budget deficit under control in a bid to regain the confidence of financial markets and bring the UK out of “the shadow of debt and uncertainty”. And he said he would reduce red tape to give businesses more certainty, asking “how can you win the order when the taxes you pay and the regulation you face price you out of the market”.
The chancellor also pledged to reform Britain’s Controlled Foreign Companies rules, which have been blamed for pushing businesses like advertising giant WPP and pharmaceuticals firm Shire abroad.
“The chancellor hit the right note with British companies competing in global markets. We are pleased that he has recognised that the tax competitiveness of the UK is challenged,” said CBI deputy director-general John Cridland.
Q&A: CAPITAL GAINS TAX
Q. HOW ARE CAPITAL GAINS TAXED AT THE MOMENT
A. All capital gains are taxed at a flat rate of 18 per cent, after the government lowered the headline rate in 2008. Entrepreneurs pay a lower, 10 per cent rate on the first £2m of lifetime gains.
Q. HOW IS THIS GOING TO CHANGE?
A. The Liberal Democrats wanted to tax income and capital gains at the same rate, and this policy was included in the coalition agreement. That means the government is likely to announce a new 40 per cent top rate of capital gains tax, on all gains over £150,000. However, some want a regime that distinguishes between short-term and long-term gains.
Q. WHY SHOULD CAPITAL GAINS BE TAXED LIKE INCOME?
A. Proponents of raising CGT say that lots of people are choosing to make capital gains instead of drawing income because there is such a disparity between the rate each is taxed at. This so-called “income shifting” is pushing down tax receipts, they say.
Q. WILL ALL CAPITAL GAINS BE HIT?
A. No. The chancellor is expected to introduce a range of reliefs and allowances to help businesses and entrepreneurs. So while a second home or gains from a spread betting win are likely to be hit with the top rate, a family-run business or a technology start-up will probably end up paying a lower rate.