The proposed reduction from 40p in the pound to 24p would have gone part of the way to honouring the Prime Minister's pledge to abolish capital gains and inheritance taxes. But the Chancellor made a last-minute U-turn when a Treasury official noticed that there would be a windfall for Mr Brown and other highly paid executives if he went ahead.
Mr Brown's 75 per cent pay increase last year, before he stepped down from British Gas, created a national uproar. Although not Britain's highest- paid businessman, he became the lightning-conductor for popular disapproval of executive greed.
On top of his salary and incentive payments of nearly pounds 500,000 and a pension worth pounds 5.5m, Mr Brown had share options worth about pounds 300,000 a year ago. A reduction of 16p in the rate of capital gains tax could have saved him nearly pounds 50,000 in tax if he had exercised all the options.
The average tax saving for fat cats if the Chancellor had gone ahead would have been around pounds 30,000, and the handful with share options worth more than pounds 1m would have saved close to pounds 160,000 in tax. The move would have delighted the Labour Party, which already regarded Mr Major's pledge as the Government's worst tactical mistake on the tax front. Labour had prepared a fat cats dossier ahead of last year's Budget just in case.
The party calculated that abolition of the tax would create a boardroom bonanza at the privatised utilities, with tax savings of pounds 492,000 for Roger Unwin, former chief executive of London Electricity, for example, and pounds 181,000 for Ed Wallis, chief executive of Powergen.
Although both Mr Major and Mr Clarke have since repeated the promise to abolish capital gains tax, tax experts believe the Government will remain vulnerable to the same problem. "They are very keen not to give the Labour Party any easy targets," said Andrew Dilnot, director of the Institute for Fiscal Studies.
A move to abolish inheritance tax was more likely this year. "It is symbolic, and it's cheap and easy because it does not raise much money," he said.
However, even if there are fat cats who would profit from a cut in capital gains tax, Mr Brown is no longer among them. His options over 703,000 British Gas shares are currently worthless because of the low level of the company's share price on the stock market.
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