THE GOVERNMENT is facing a damaging revolt from angry Tory backbenchers over plans to hike capital gains tax (CGT).
Simmering dissent among Conservative MPs came to a head yesterday, when former cabinet minister John Redwood wrote an open letter to the Treasury saying it “would send a strange signal if a Lib-Con government decided to more than double the CGT rate set by Labour”.
The coalition government is preparing plans to tax gains on non-business assets like second homes at rates similar to income, suggesting CGT will almost double from 18 per cent to 40 per cent.
Redwood said he had been “swamped” with support for a alternative set of proposals to introduce a rate of CGT that drops over the length of time an asset has been held.
Lord Forsyth, the Tory peer that chaired a fair tax commission for George Osborne in 2006, told City A.M. there would be a “huge amount of momentum” against the government if it tried to railroad changes to the existing regime through parliament.
“There are lots of very senior people on the Conservative side that are really exercised about this,” he said.
And Forsyth criticised the Prime Minister, who recently said that second homes should be taxed at a different rate to business assets because they didn’t benefit “the whole economy”.
Forsyth said: “I don’t think it’s really any business of the Treasury what people invest in.”
He added: “In the election campaign, David Cameron said he would always support people who do the right thing. People who are investing for the future are doing the right thing. It would be very nasty to attempt to punish them.”
Liberal Democrat business secretary Vince Cable, a leading advocate of hiking CGT, dismissed Redwood’s alternative proposals.
“It’s like the taper scheme that the Labour government had to abandon. What was happening was private equity bosses were paying a lower rate than their cleaners,” he told City A.M.
Cable added: “I’m sure the chancellor will be introducing higher rates in his Budget.”