Shock Capital Gains Tax rise angers hardline Conservatives

David Cameron is set to anger Tory traditionalists by approving a big rise in capital gains tax (CGT) to close a bigger-than-expected "black hole" in the public finances.

A "top-to-bottom" audit of public spending will be launched by the coalition government today by a new independent Office of Budgetary Responsibility, headed by Sir Alan Budd, a former Treasury chief economic adviser. It will shape the emergency Budget expected next month.

Mr Cameron appears ready to bow to pressure from his Liberal Democrat partners for CGT on the sale of shares and second homes to be raised from 18 to 40 per cent. Although there would be generous exemptions for entrepreneurs, the move will worry some Tory MPs, who fear it will alienate the party's natural supporters.

The Prime Minister told the BBC's Andrew Marr Show yesterday: "When you have a capital gains tax rate of 18 per cent and a top rate of income tax at 50 per cent, you'll find people finding all sorts of ways to treat income as capital gains. Now what we've said is there is a very big difference between the capital gains that someone pays on, say, a second home – which is not, you know, necessarily a splendid investment for the whole economy – there's a difference between that and actual investment in business assets."

He said the proposal was part of a "fairness agenda" that would help the Government's goal of lifting tax allowances to take more people out of tax – a flagship Liberal Democratic manifesto pledge. " I think people will understand," he added.

The Liberal Democrats hope the CGT shake-up will be included in the first Budget. But George Osborne, the Chancellor, thinks more work is needed and has asked for more options to be drawn up.

The Treasury said: "There are a range of possible options on CGT to fulfil this aim and no decision has yet been taken on one option. It will be important to take the time to get this right."

Yesterday, Mr Cameron said the Government had "no plans" to raise VAT, despite growing speculation among economic experts that it will go up from 17.5 to 20 per cent. But a final decision could depend on the report of the nation's books by Sir Alan's team.

There are growing signs that ministers in the coalition want to "bite the bullet" by implementing big cuts as soon as possible in the hope that they can be blamed on their inheritance from Labour. Yesterday, several Tory and Liberal Democrat ministers complained that outgoing Labour ministers had deliberately left behind "poison pills" and "stink bombs" by rushing through big spending commitments just before this month's election.

The new administration will halt some of Labour's decisions, but others may prove too expensive to unravel. Yesterday, David Cameron announced a curb on generous bonus payments for 4,200 senior civil servants and 1,100 senior NHS managers. They will be restricted to the top 25 per cent of performers, so 1,700 Whitehall officials and 450 NHS managers will no longer receive bonuses, saving about £15m.

The average bonus for a top civil servant was £12,700 last year. Some 2,933 officials and 850 health managers received extra payments totalling £35m.

In another clampdown, the left-of-centre economics commentator Will Hutton will advise ministers how to implement plans to ensure that no one at the top of a public-sector body earns more than 20 times its lowest-paid person. This is a sign that Mr Cameron will recruit so-called "goats" from outside Tory circles to create a "government of all the talents".

Ministers claimed they had already found "black holes" in the budgets left them by Labour. The projects said to be causing alarm include a £13bn tanker aircraft programme for the Ministry of Defence, a £1.2bn immigration service IT project, and school building contracts worth £420m.

'Goats' in the machine

*WILL HUTTON

Left-of-centre economics commentator, executive vice-chairman of the Work Foundation think tank. Will head a "fair pay" review to implement Tory pledge to ensure no senior manager in public sector earns more than 20 times the lowest-paid person in the organisation. Former BBC economics correspondent and editor-in-chief of The Observer.



FRANK FIELD

Veteran Labour MP for Birkenhead in talks with Government about becoming an adviser on poverty. Free-thinking reformer; unhappy year as Welfare Reform Minister in 1997. Labour said his ideas were unworkable. May get a chance to put them into practice with Iain Duncan Smith, Work and Pensions Secretary. Favours tough line on immigration.



LORD BROWNE OF MADINGLEY

Former chief executive of oil giant BP. Crossbench peer heading review into university finance. Tipped for Whitehall role overseeing drive to cut waste. Could be "super-director" to push through spending cuts and higher productivity.

News
Alan Bennett has criticised the “repellent” reality shows which dominate our screens
tvBut he does like Stewart Lee
Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
tech
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Sport
David Moyes and Louis van Gaal
football
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
i100
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
News
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
Sport
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
rugby
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Life and Style
food + drink
News
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
News
A cabin crew member photographed the devastation after one flight
news
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Pharmaceutical Computer System Validation Specialist

£300 - £350 Per Day: Clearwater People Solutions Ltd: Pharmaceutical Computer ...

High Level Teaching Assistant (HTLA)

£70 - £90 per day: Randstad Education Birmingham: Higher Level Teaching Assist...

Teaching Assistant

£50 - £80 per day: Randstad Education Birmingham: Randstad Education is the UK...

Senior Java Developer - API's / Webservices - XML, XSLT

£400 - £450 Per Day: Clearwater People Solutions Ltd: Our client is currently ...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits