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Shadow chancellor George Osborne was today warned that a proposed tax shake-up would be an “act of vandalism”.
He was strongly criticised over plans to stop interest payments firms make on debts from being tax deductible.
Lord Forsyth, who headed a tax policy review for David Cameron three years ago, urged Mr Osborne to ditch the reform amid concerns it could see investors leaving Britain. Private equity chiefs warned it would cause “chaos” in their industry — which relies on borrowing to buy out companies — and in the wider economy.
Former Conservative Cabinet minister Lord Forsyth said: “This isn't the moment to start messing about with the rules on debt interest. We ought to be thinking about how to get growth.
“What people in business want is stability. They don't want governments constantly chopping and changing the tax system.” Jon Moulton, of private equity house Alchemy Partners, stressed that property and leasing firms would “sink like stones” if Mr Osborne introduced the tax change: “There would be chaos if it were removed. Put simply, it would be an act of vandalism.”
Mr Osborne's aides were understood to be insisting that the possible changes were likely to apply only to future deals not current company debts.
Reader views (5)
Another fantastic idea from Cameron's bag carrier. While private equity has its faults, any form of investment should be welcomed in the current crisis. I'm not sure what the Tory vision for the UK is - they talk down the economy, reduce parliamentary debate to that more often witnessed at 6th form debating clubs and display double standards when disciplining MPS for expenses. What next?
- Steve S, London
What ignorance your correspondents show! Every company that borrows anything can claim this relief, not just a few private equity ones. Every company in every other OECD country gets relief so at a stroke the UK becomes uncompetitive for borrowing and investment. It will regress ecenomic development in the UK by around 350 years. bonkers
- Peter Bench, London
For once, a great idea from Osbourne and the tories. Make it better by applying it to existing debt burdens and kill of "private equity" and all the other trick card business schemes ASAP
- Max, london
Er, how many Companies who borrowed, or were forced to take debt into their balance sheets by so called Financial Experts have now gone tits up. Not being able to offset this debt interest may discourage reckles borrowing. Just a thought.
- Alan, carlisle uk
I see the bleating is from the "private equity chiefs", those erudite, upstanding institutions that have created billions of pounds-worth of debt for UK companies, whilst remunerating their own directors to the tune of millions of untaxed income.
Go ahead with it George, the UK does not need these leaches.
- Nobby Clark, Perth, the Scottish one
