UK Tax: Capital gains tax and the politics of envy

By Simon Heffer, 28 May 2010 -- One of the worst features of Leftists – such as Vince Cable, the Business Secretary and inventor of the idiotic proposal to raise capital gains tax (CGT) – is that they believe people with assets exist purely to be taxed. Furthermore, they seem to believe that the so-called rich (in other words, anyone who has been putting money away regularly for his or her retirement) will not only not mind this happening, but will be in some way grateful to have their guilt at being "rich" assuaged by being kicked in this way. They could not be more wrong.

The whole principle of capital gains tax (CGT) – even at the existing level of 18 per cent – is unacceptable. Most people who make a capital gain these days do so using money they have earned, and which has already been taxed. They have often made capital gains by investing in the stock market, and therefore putting their money to the service of helping another enterprise to grow, and to create prosperity. Unless we create prosperity, other people won't have jobs, but will instead have to throw themselves on the mercy of the state; and if they don't have jobs, they don't pay income tax, which means a shrinking pool of those in work must fund everything society deems it needs: hospitals, schools, pensions and the rest. More to the point, encouraging people to save for their long-term future is entirely sensible because of the burdens it removes from the state. So why decide to punish such positive behaviour?

Excessively taxing people's thrift, enterprise and hard work is not only morally offensive: it is also bad for the financial health of our country, and for our ability to raise our standards of living for the future. When Labour introduced its 50 per cent tax band, it barely went through the motions of pretending that it was for any reason other than spite, and to appeal to those who enjoy the politics of envy. Dave, I hope, has recognised this, in his remarks to this newspaper last weekend about scrapping the rate if it raised no money. But would the Lib Dems let him do that? Indeed, given his obsession with the sentiments of focus groups comprising largely Labour voters, would he really want to do it himself?

I know we have a hideous deficit that we have to reduce, and shocking levels of debt that must be repaid. There are ways to do that, however, other than by yet again picking the pockets of middle-class people whose only aim in life has been to provide for themselves and their families, and to avoid asking for help from the state. The £6 billion cut in spending this week doesn't even make a dent in it. The Tories never wanted to sack the socially unproductive members of Gordon Brown's client state, who cost billions to employ and have jobs purely to encourage them to vote Labour. With the Lib Dems now holding the whip hand, the chance of rebalancing our economy by shifting resources from the public to the private sector appears to be a non-starter.

Yet it is, however much the coalition refuses to admit it, the only way to get us back on track. A serious government would cut spending more and faster, using a part of the savings not just to keep capital gains tax (CGT) low, but also to cut income tax for everybody. The last of those is necessary to stimulate demand and thereby keep the private sector expanding. Tory MPs are right to hold Dave's feet to the fire on these matters. Dr Vince poses as a man who understands economics, but at heart he is a redistributionist. The only redistribution we need at the moment, however, is of the public's money back into their wallets.