CBI urge against tax reform

Richard Lambert, director general of the CBI, said his organisation will lobby "as hard as it knows how" to make ministers reverse planned changes to the capital gains system.

The announcement by Chancellor Alistair Darling in his Pre-Budget Report had caused more controversy among CBI members than any other issue for years, Mr Lambert said in an interview ahead of next week's CBI annual conference in London.

"It was a mis-judgment and a mis-understanding of the role that tax plays in business. A lot of businesses have built their plans on an assumption that the regime Gordon Brown introduced when he was Chancellor, was something that could be relied on."

Discussions are being held between Treasury officials and business leaders on resolving the issue, but Mr Lambert warned firms will be "seriously affected" if the plan to increase capital gains tax - near doubling of capital gains tax from 10% to 18% - goes ahead.

"The problem the Government has is that they need money to plug a funding gap. What we are saying is they won't do it this way."

Mr Lambert said he believed an "army" of tax accountants will be employed by firms to work on their tax arrangements before the end of the tax year if the issue was not resolved.

The CBI leader said the controversy had "set relationships back" between business and the Government because even firms not directly affected by the tax change were questioning what the Government was doing.

Mr Darling will address the CBI conference on Tuesday, at a time when the Government is also under increasing pressure because of the Northern Rock crisis.

The CBI believed there was too much employment legislation being introduced and remained opposed to any moves to give new rights to agency workers, one of the burning issues for trade unions, said Mr Lambert. But he backed a number of the Government's education reforms and efforts to improve the skills of workers and praised unions for their work on learning.