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Finance Bill

My hon. Friend is right. It is not just a matter of those who are directly affected by the capital gains tax changes; it is part of a bigger picture of indecision, unsignalled change and lack of proper consultation around the business tax regime. If the Minister got out at all and talked to people in City boardrooms, she would know that that has become a real theme that we should all be seriously concerned about. There are two aspects to the problem. First, there is the substance of the changes that clause 3 introduces, which amendment No. 8 is designed to address; secondly, there is the manner in which they were introduced, particularly the lack of consultation, the lack of clear signposting and the reversal of what had been seen as a long-term commitment by the Government to a lower CGT rate for long-term gains. That, I suspect, as much as the substance of the measure itself, is extremely damaging to the climate for Britain's entrepreneurs. By raising business taxes at a time when our competitors are cutting them to support investment and underpin their economies, the Government have undermined business confidence. The abandonment of what was an iconic long-term Labour policy of a 10p capital gains tax rate for long-term gains—announced with great fanfare by our present Prime Minister even before the Labour Government came to office—has dealt a blow to British enterprise and entrepreneurs at a time when we should be promoting it and them. I have to say that we have a great deal of sympathy with the sentiment behind amendment No. 8, and I agree with almost everything the hon. Member for Dundee, East (Stewart Hosie) said in introducing it. Regrettably, however, it would not quite do what its sponsors wish it to do. It would indeed postpone the change in the main rate from 40 to 18 per cent., but because the implementation provision that the amendment would introduce covers only subsection (1), schedule 2 would be effective anyway, ending taper relief and indexation. It would, I think, have the opposite effect to that which the hon. Gentleman seeks, in that it would push the effective CGT rate on business assets up to 40 per cent., rather than leaving it at 10 per cent., as he intends. For reasons that I shall outline, we believe that the Government need to go back to the drawing board on CGT reform, consult properly and come forward with a comprehensive set of CGT proposals that recognises the need to promote long-term investment and encourage entrepreneurship. The amendment calls on the Government to measure and report on the impact of the proposed changes on business investment, the tax burden on investors and the housing market—in particular, the buy-to-let market. As my concerns relate to precisely those areas that the hon. Gentleman outlined—even though my solution is to vote against clause stand part, rather than to support the amendment, for reasons I have explained—I hope that it is convenient for me to set them out now, as time is limited, so that we might not need a separate clause stand part debate. It all started with the pre-Budget report; hon. Members will remember that saga. The pre-Budget was brought forward to early October so that it could act as a pre-election Budget—a showcase for whatever bribes the Prime Minister would offer the nation in the election that never was. That plan was torn up when the Prime Minister bottled it and canned the election for reasons that, we are assured, had nothing whatever to do with the opinion polls. The pre-Budget report—[Interruption.] I hear sceptical comments from those on Benches behind me, but I could not possibly comment. The pre-Budget report still had to go ahead on 9 October, to save face. So the tax strategy for Britain—the world's fifth largest economy—as we faced the first signs of economic slowdown in the aftermath of the Northern Rock fiasco had to be drawn up on the back of a fag packet over the weekend. Even one of the Prime Minister's closest allies, the hon. Member for Coventry, North-West (Mr. Robinson), described that as"““policy making on the hoof.””" And it showed—in the lack of consultation on proposals for major changes to business taxation and the complete absence of a coherent narrative as key parts of Labour's long-term business tax strategy were discarded overnight without explanation or warning. The words of that pre-Budget report speech were scarcely out of the Chancellor's mouth before they were drowned out by the crashing of gears being thrown into reverse. It was hours before Downing street was briefing against the Chancellor, and just days before the climbdowns began, but the damage to Britain's reputation as a business-friendly economy will take longer to reverse. I say to the Minister that the damage to Labour's reputation as a business-friendly party may be irreversible. A common theme is beginning to emerge from the PBR: the systematic subordination of the long-term interests of the country—even as identified and clearly set out by the Labour party—and of our economic future to the short-term political agenda of our Prime Minister. The Chancellor's claim that his CGT reforms were made in the name of simplification was as bogus as the same claim made for the abolition of the 10p income tax rate. The proof is in schedule 3, where the complex and still extremely unclear entrepreneurs' relief adds a tier of complication to the system that was supposed to be simplified. This is a missed opportunity for comprehensive modernisation of business capital taxes based on a full, extensive and genuine consultation. In fact, the capital gains tax change was a straight tax grab, originally designed to raise £900 million a year for the Treasury, and a wildly misplaced attempt to address the issue of taxation of private equity-carried interest—something that had been exercising the Government and the trade unions before the pre-Budget report and, ironically, a problem that now looks likely to have gone away all by itself, as the bank credit on which private equity deals depend has all but dried up.