SIR – The Prime Minister’s latest warning about the October Budget is a magnificent lesson in manipulating expectations (“Starmer’s tax alert for middle England”, report, August 28).
As he appeals to the public to make sacrifices, Sir Keir is reinforcing the narrative that only he has the courage to make difficult decisions. But the real purpose is to test the public’s capacity to accept very high taxation.
The measures in the forthcoming Budget will undoubtedly be less severe than we feared. Once hiking taxes has become the new normal, then we should really fear the spring and autumn 2025 Budgets.
Mike Tickner
Winterbourne Earls, Wiltshire
SIR – Labour claims to be “fixing the foundations” of the country. In order to fix the foundations properly, one has to demolish the house. It looks like the Government will do just that.
Peter Gilbert
Ross-on-Wye, Herefordshire
SIR – The Prime Minister has warned the country to expect a tough Budget in the autumn, and it is widely expected that it will include an increase in capital gains tax (CGT).
However, he seems not to realise that CGT is a voluntary tax for most people. If you don’t want to pay the tax, you don’t sell the investment. What this does, of course, is lock people into an inactive portfolio, which eventually becomes unbalanced and therefore much riskier than most managers would advise. More importantly, it creates a passive investment approach and means that much less capital is available to back new companies.
This shortage of risk capital is disastrous for an economy that once thrived on entrepreneurial activity.
Graham Barber
Long Melford, Suffolk
SIR – Adam Smith cites Nigel Lawson’s decision to equalise capital gains tax with income tax in his 1988 budget (“Rachel Reeves is about to hoodwink the public with a disastrous tax raid”, Business, August 27), but Lawson also rebased the cost of all assets held on March 31 1982 to their market level at that date, so the gains built up before then wouldn’t be subject to the uplift.
His predecessor, Sir Geoffrey Howe, had introduced an indexation allowance so that tax was only paid on gains above the rate of inflation. This was replaced by taper relief in Gordon Brown’s 1998 budget, only to be abolished in 2008 by Alistair Darling, who reduced the CGT rate to 18 per cent as compensation.
If Rachel Reeves increases CGT without reintroducing an indexation allowance or taper relief, it will amount to a tax on inflation, which is likely to soar once all the public sector wage increases and energy price rises feed through the system.
Such a tax would be devastating to investment and highly immoral.
David Miller
Chigwell, Essex
