Red Ed saw another bandwagon he could jump on at his press conference on Monday. He lashed out at “financiers who creamed off millions”, blaming them for the near collapse of the UK’s largest care-home provider Southern Cross, which is laying of thee thousand staff as it cannot afford its £250 million rent bill. American investors Blackstone made a £134.5m profit from their sale of the company in 2007. As they held their shares for two years after floating the business, they only had to pay Capital Gains Tax on 25% of this profit, which worked out at £33.6m. If they had paid CGT at the usual 40% rate on 100% of the gain, they would have had a tax bill of £53.8m – £40.4m higher than they paid. But who was it that enabled them to “cream off millions”?
In April 1998, the government introduced taper relief for business assets, whereby the CGT rate was charged on only a proportion of the gain made from the disposal of an asset. In 2002, the Treasury increased this taper. Rather than a taper of 50% for a business asset held for two complete years, it was reduced to 25%. And who was running the show while these changes were thought up and implemented?
Please step forward Treasury Special Advisers Edward Miliband (1997 -2002) and Edward Balls (1997 – 2004).