September 30, 2011 11:46 pm

Michael Spencer

The founder of Icap and one of Britain’s wealthiest businessmen wants to taper the capital gains tax rate to encourage entrepreneurs

One of Britain’s wealthiest businessmen, earning his fortune as founder of Icap, the world’s biggest interdealer broker. One of the City’s most influential Tories, he stepped down as treasurer of the party a year ago

Youth unemployment is dangerously high (currently around 20 per cent) and has deeply damaging long-term implications. However, employing young people fresh out of school or university is not always immediately profitable for employers who need to train and invest in them. Give a “tax holiday” with a zero rate employer’s National Insurance (currently 13.8 per cent) for all employees under the age of 23.

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Contrary to popular myth the top rate of income tax in this country is not 50 per cent but in reality a whopping 58 per cent when you factor in employee and employer National Insurance (2 per cent and 13.8 per cent respectively). This is higher than virtually every other country in the world and is a massive disincentive for higher earners to come to the UK or stay here (and most can move). Without doubt this is damaging enterprise, investment and employment in this country. The narrow politics of anti-wealth creation must be ignored and the top tax rate must be lowered soon; if not immediately then I suggest the government pre-announce a reduction back to 40 per cent within three years.

Entrepreneurs in this country need to feel wanted and encouraged. The Enterprise Investment Scheme (EIS) is complex and clumsy. Taper the capital gains tax rate down to 10 per cent for qualifying investments held for five years.

“Green Taxes” on business and individual households are costly and of doubtful value (especially if no other countries follow). Scrap them for the next five years at least.

Very little, apart from rhetoric, has been done to reduce the huge administrative and legal burden of running a business. Less talk and more action please. And don’t forget KISS – “Keep It Simple”.

Finally, whatever the mutterings of those who don’t understand financial markets (and what is presently happening in Europe) our government must stick with its deficit reduction plans. Fifty-one per cent of GDP today is accounted for by the state; we can never expect a growth economy with this imbalance. Furthermore if we don’t cut our deficit, our credit rating will be lowered, our cost of borrowing will shoot up and we will possibly finish up in the same spiral as some other European countries. Don’t believe those who say this can never happen. They said the same about some other disasters that are currently unfolding in painful slow motion.

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