Cameron reconsiders capital gains increase to placate Tory right

Click to follow

The unity of the coalition Government was under strain last night after David Cameron hinted at a compromise with his Tory critics over the adoption of Liberal Democrat tax-raising plans.

The Prime Minister promised that concerns over proposed rises in capital gains tax (CGT) would be taken into account by the Government.

But his attempt to calm nerves on his backbenches was immediately undermined by the Liberal Democrat Business Secretary, Vince Cable, who vigorously defended the moves to raise the current 18 per cent rate of CGT – typically applied to windfalls from the sale of shares and second homes – to 40 or 50 per cent. The former ministers John Redwood and David Davis argue that the planned increase would penalise savers and entrepreneurs.

The Independent has learnt that other MPs have also privately raised their worries with the Chancellor, George Osborne, arguing that the rise should be deferred or replaced with a compromise "tapering" system targeted mainly at short-term windfalls.

Mr Cameron told the BBC yesterday he would listen to all the arguments and that a decision would be made at the time of the Budget.

But in a separate interview Mr Cable said: "We committed ourselves in the coalition agreement to fairer taxation. [That] involves looking at wealth as well as looking at income."

Mr Cameron will promise today to "reopen Britain for business" as he paints a bleak picture of industrial decline and mass unemployment across much of the country. He will pledge to "rebalance" an economy over-reliant on the south-east of England and on public sector jobs and begin setting out the coalition's strategy for fostering economic growth.

The Prime Minister will claim that the country is at a "turning-point", and that his Government is preparing to breathe new life into private business and industry in all parts of the country.

He will argue that Britain has been "sleepwalking" to economic disaster for years: "Our economy has become more and more unbalanced, with our fortunes hitched to a few industries in one corner of the country, while we let other sectors like manufacturing slide.

"It has become over-reliant on welfare, with mass worklessness accepted as a fact of life and around five million people now on out-of-work benefits. It has become increasingly hostile to enterprise," he will say. "It has become far too dependent on the public sector, with over half of all jobs created in the last 10 years associated in some way with public spending."

Mr Cameron will insist that economic power can be spread across the regions and new hope brought to the unemployed: "Can we inject new life into the private sector, so that enterprise can drive not just our recovery but the re-building beyond it?

"Can we go from an economy built on debt and borrowing to one built on saving and investment? Can we re-open Britain for business? My answer is an unequivocal, emphatic yes."