Darling to listen on tax concerns

Alistair Darling has acknowledged that his planned changes to capital gains tax are "controversial" and pledged to work with businesses on them.

The chancellor used a speech at the CBI annual conference on Tuesday to hint at reforms to his plans to simplify the tax.

Darling announced in his pre-Budget report last month that the government would increase the levy on the sale of an asset from 10 per cent to 18 per cent next April by withdrawing taper relief, prompting criticism from the business community that he was hitting small firms.

And while he is not expected to backdown on his simplification of the system, he said he is listening to what lobby groups such as the CBI have to say and will report to Parliament before Christmas

"I know that my proposals to introduce a single rate of capital gains tax have been controversial," he said. "That was inevitable.

"We are working with the CBI and other business organisations to listen to what you have to say. I expect to publish final proposals in the next three weeks."

The chancellor has already indicated that he will introduce a retirement tax relief to compensate the owners of small companies who would be hit when selling their firms.

And he said he would seek to maintain the UK as a competitive business environment.

"I am determined to do everything I can to keep it that way and keep Britain as a good place to do business," Darling pledged.

"In the run-up to the Budget, I want to continue to work with the CBI and other business organisations to ensure that encouraging enterprise remains at the heart of this approach."

Speaking earlier at a news conference in Number 10, Gordon Brown also made clear that Darling has "always said the discussions on the implementation of the pre-Budget report will happen with the business community".

"The implementation has not yet been finalised," he added.

But the prime minister pointed out that the headline rate of capital gains tax was 40 per cent when Labour came to power in 1997, with the new rate highly competitive by international standards.

Elsewhere in his speech Darling sought to steady nerves ahead of an expected slowdown in the economy next year.

"This government's determination to take the tough decisions means that even in today's uncertain times - with turbulence in international financial markets and record oil prices - we can be confident of the resilience of the UK economy," he said.

He also defended his £24bn extension of Bank of England loans to Northern Rock, despite criticism that he was risking public money.

Darling toldl delegates: "I believe it was right to intervene; that it was right to put in place guarantee arrangements for savers. And above all, it is right to
see it through.

"It was never going to be an easy decision. There were always going to be critics when the going got tough.

"But that is not the point. Far worse would have been to have done nothing, to have allowed that bank to have gone under. I believe this would have had very serious consequences for the banking system and for the British economy.

"Governments will never succeed in avoiding the unexpected and the unwelcome and this episode certainly answers to both descriptions.

"But government should also be judged by how it responds to these difficulties when they arise."

He also acknowledged that the recent loss of child benefit data by HM Revenue and Customs was a "huge problem".

"It is difficult but we have to get on with it and sort it out," the chancellor said.